Firm capabilities and performance: a necessary condition analysis

The purpose of this paper is to employ a necessary condition analysis (NCA) approach to investigate the level of necessity of two conditions, marketing capability, including responsiveness to customers, responsiveness to competitors, responsiveness to the macro environment, and business relationship quality, and innovativeness capability for firm performance.

Using a survey data set collected from a sample of 311 Vietnamese firms, this study explored the levels of necessity of the components of marketing capability and innovativeness capability by NCA. The study also tested the net effects of these components on firm performance by multiple regression analysis (MRA).

The MRA results reveal that except for responsiveness to the macro environment, other components of marketing capability and innovativeness capability have positive effects on firm performance. Further, firm size affects performance but industry types do not. The NCA results indicate that these conditions exhibit different levels of necessity for the occurrence of firm performance.

A major limitation of this study is the exploration of necessary levels of only two key firm capabilities, i.e., marketing and innovativeness. Several other capabilities, such as, research and development, operations capabilities, and other market-based assets should be investigated in future research.

The findings suggest that firms should pay attention not only to the net effects (β weights) but also to the levels of necessity of firm capabilities for their target outcome.

This study is among first studies investigating the levels of necessity of marketing capability and innovativeness capability for firm performance.