Delineating links among dynamic capabilities, operational capabilities and firm performance

Abstract

Dynamic capabilities influence firm performance by renewing operational capabilities but it is unclear
from prior studies whether they actually influence firm performance through operational capabilities.
Process-quality, process-efficiency and operational flexibility capabilities are three operational
capabilities. It is also unclear whether a given dynamic capability influences firm performance by
renewing a single operational capability or several of them. Using a firm’s capability to learn from
customers as a proxy for a dynamic capability, we find that it renews all three operational capabilities,
but a firm’s learning capability influences firm performance only through the process-quality
capability. We theorize that renewal of former two capabilities serve to maintain existing operations,
while renewal of latter capability helps a firm gain an advantage. We term the capability that can used
to simultaneously maintain existing operations and influence performance a dual-purpose capability.
Future research should expand to understand how dual-purpose capabilities influence performance.

Keywords: Capability-based view; Dynamic capabilities; Operational capabilities; Firm performance;
Firm efficiency