Dynamics in Farm Specific Capabilities: The Impact of Capabilities on Competitive Advantage

Abstract

Aims: Resource based view (RBV) consists of a rich body of related theoretical tools to analyse sources of competitive advantage at firm level and it is based on the economic rent concept which explains that a firm as a collection of unique resources and capabilities. Although the RBV theorises the relationship between resources and competitive advantage, it is still questionable that the RBV lacks a causality chain between resources and competitive advantage. This study questions the direct relationship between a firm’s specific resources and competitive advantage contending that this relationship is mediated through firm’s specific capabilities. Study Design: An empirical investigation was conducted with sample consisted of farmers engaged in the commercial cultivation of minor export crops in Sri Lanka. Structural equation modelling analysis was employed to test the indirect relationships. Results: The results exemplify that the hypothesized indirect effect of capabilities on competitive advantage and different capabilities have a different effect on competitive advantage. Managerial implications are highlighted with the interesting further research areas