Firm capabilities and the performance in regional polarization

Abstract

Purpose

The purpose of this paper is to study the effect of firm-specific capabilities on performance in regional polarization.

Design/methodology/approach

The study develops and tests a theoretical model relating regional economic characteristics and firm-specific capabilities to performance. Based on a survey conducted by the World Bank, data on 17,196 firms in 20 Latin American countries were constructed and analysed.

Findings

The performance impacts of a firm's operations capability, technological capability and marketing capability were all found to be strengthened by operating in the Brazil-group economies – more favorable economic environments.

Research limitations/implications

The findings confirm empirically that regional polarization has an important influence on firm performance. Moreover, these findings suggest a more nuanced understanding of the effects of firm-specific capabilities on firm performance. Some types of economies foster the effects of firm-specific capabilities and offer a favorable economic and institutional environment which can greatly stimulate firms to re-configure and develop their skills and improve their global competitiveness, leading to a better firm performance.

Originality/value

As Robles has noted, “Given that polarization is a recent [development], there is [a] paucity of research on how firms cope with either expansionary or depressed domestic and global market conditions. There is little evidence of effective strategies and [their] performance implications in expansionary and contracting markets in the region.” This study addresses this important gap in the literature by demonstrating that operating in a country grouped with Brazil-type economies was positively related with firm performance.

Citation

Wu, J. and Wu, Z. (2013), "Firm capabilities and the performance in regional polarization", Management Decision, Vol. 51 No. 8, pp. 1613-1627. https://doi.org/10.1108/MD-10-2012-0764