Capability building and performance: A study of pioneer Internet firms
The resource-based view (RBV) of the firm advocates that organizational resources and capabilities are the cornerstones of competitive advantage, but a more fundamental issue may be the question of how, these resources are created, and whether the methods of resource accumulation have an impact on the firm and its performance. With these questions in mind, the purpose of this research was twofold. First, this project explored the factors that could influence the firm's decision on how to accumulate new resources and abilities. The factors included knowledge and financial resources as well as market growth rates. The second goal was to determine if the methods by which firms build new capabilities would yield any performance advantages, which I operationalized in three ways as market performance, survival, and exit premiums. The relationships were tested on a sample of over 400 pioneer Internet firms since they were operating in an innovative, dynamic, and highly competitive environment. Archival data were gathered to create a proprietary database that was analyzed using multiple regression, logistic regression, and event study methodologies. The result from the antecedent study indicated that firms may choose to strengthen existing capabilities with internal developments and compensate for weak areas with acquisitions. The market related constructs were not significantly related to the choice of mode. The results from the three performance studies indicated that mode and performance were not directly linked despite differences in implied strategic intent, time horizon, and performance criteria. Possible explanations for the significant and non-significant results were explored as well as research limitations and potential directions for future studies.
The contributions of this dissertation to the field of strategy included extending current research rooted in the RBV by linking RBV-based constructs to performance, and in doing so, established that both the type and amount of existing resources had an influence on future firm activities. Multiple performance standards and multiple conceptualizations of mode were also used to capture the complexities of capability building. Through this, contextual value was observed through the consistent performance findings for mode and the contextual nuances found in the different results for the control variables.