Clarifying the conditions and limits of the contributions of ordinary and dynamic capabilities to relative firm performance
Article first published online: 4 AUG 2010
Copyright © 2010 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 32, Issue 3, pages 254–279, March 2011
How to Cite
Drnevich, P. L. and Kriauciunas, A. P. (2011), Clarifying the conditions and limits of the contributions of ordinary and dynamic capabilities to relative firm performance. Strat. Mgmt. J., 32: 254–279. doi: 10.1002/smj.882
- Issue published online: 5 JAN 2011
- Article first published online: 4 AUG 2010
- Accepted manuscript online: 4 AUG 2010 12:00AM EST
- Manuscript Revised: 19 JUL 2010
- Manuscript Received: 9 MAY 2008
- firm performance;
- environmental dynamism
Strategy scholars have argued that capabilities can influence firm performance through a variety of means and mechanisms. However, the role of capabilities and their proposed contributions have been narrowly theorized and insufficiently tested. We contribute to resolving these issues by considering the conditions under which ordinary and dynamic capabilities contribute to higher relative firm performance. We do so by examining the positive and negative contributions of capabilities to relative firm performance as well as the effects of environmental dynamism and the degree of capability heterogeneity. We utilize measures of relative firm performance at both the process and firm level within a sample of Chilean firms, which due to a dynamic environment allows for a clearer link between the environment and the use of capabilities. We find that environmental dynamism negatively affects the contribution of ordinary capabilities and positively affects the contribution of dynamic capabilities to relative firm performance. Further, heterogeneity strengthens the contribution of dynamic capabilities to relative firm performance, but is less important for ordinary capabilities. Interestingly, we find support for the direct effects of capabilities to be stronger with a process-level performance measure, whereas the influences of environmental dynamism and heterogeneity are stronger with a firm-level measure. Copyright © 2010 John Wiley & Sons, Ltd.