Date of Graduation

12-1998

Document Type

Dissertation

Degree Name

Doctor of Philosophy in Business Administration (PhD)

Degree Level

Graduate

Department

Marketing

Advisor/Mentor

Ozment, John

Committee Member

Murray, Jeff R.

Second Committee Member

Rapert, Molly

Third Committee Member

Dass, Parshotam

Keywords

Capabilities; firm performance; firm resources; strategy

Abstract

Distinctive capabilities are defined as a firm’s accumulated skills and knowledge that may lead to competitive advantage (Day 1994). Distinctive capabilities are founded upon Resource-Based Theory (Barney 1991) that focuses on internal resources as opposed to external market forces (Porter 1980). The present research discusses the integration of distinctive capabilities into this framework; that is, do certain distinctive capabilities (resources) create superior firm performance when linked to the appropriate generic business strategy?

The literature on firm performance has a rich history and is theoretically grounded in several disciplines including economics, sociology, and organizational behavior (Anderson 1982). However, there has not been much empirical support for any specific theory. That is, authors have not been successful in explaining why certain firms perform well while others do not. Several authors have attempted to link strategy to performance (Miller 1986; Dess and Davis 1984; Miles and Snow 1978; Porter 1980), but with varying levels of success. More recently, authors have attempted to tie firm performance to resources (Barney 1991; Hall 1993) and/or capabilities (Day 1994; Droge et al. 1994; Hitt and Ireland 1986), but here, too, there has not been convincing empirical support.

The objectives of this dissertation are to examine whether superior firm performance is achieved when resources/capabilities are properly matched with market strategy (what one might call—fit) and to ascertain which capabilities should be linked to which strategy. Strategy, for the purpose of this study, will be those strategic choices that were defined by Porter (1980). He hypothesized that firms may pursue two different generic business strategies in order to achieve superior firm performance, i.e., cost leadership or differentiation. These strategic alternatives will form the basis of our strategy construct for this thesis.

Since capabilities (firm resources) reside mostly at the functional level of the organization, that is where this dissertation will begin. There are many resources and/or capabilities that firms rely on to pursue their objectives. Some of these are related to specific functions such as finance, operations, logistics, or marketing. However, there has been very little research that has identified and measured the resources/capabilities of specific functional areas. One of the few areas in which studies have been conducted and for which scales have been developed is the logistics function (Global Logistics Research Team at Michigan State University 1995; Eckert and Fawcett 1996; Morash et al. 1996; Clinton and Closs 1997). Logistics expenses may represent as much as twenty percent of the total cost in many industries (Coyle, Bardi, and Langley 1996; Lambert and Stock 1993). Accordingly, this study builds upon that prior knowledge in an effort to gain a better understanding of how capabilities, strategy, and performance are related.

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