The relationship between knowledge capabilities and firm performance

Abstract

In the new economy, the sustainable competitive advantage of business firms flows from the
creation, ownership, protection and use of difficult-to-imitate commercial and industrial knowledge
assets. Such assets include tacit and codified know-how, both technical and organizational.
Resource-based theory argues that resources must be valuable, rare, inimitable, and lack
substitutes to confer competitive advantage. Although scholars recognize a positive relationship
between causal ambiguity and inimitability, the relationship among critical resources called competencies,
causal ambiguity, and firm performance remains an unresolved conundrum.
This paper takes a resource-based view to develop and test hypotheses that relates managers'
perceptions of causal ambiguity to their firm's performance. The hypotheses examine relationships
between firm performance and (1) causal ambiguity regarding the link between competencies
and competitive advantage, and (2) causally ambiguous characteristics of competencies.
Research involving 160 executives in 19 organizations provides valuable insights into the relationships
between causal ambiguity and firm performance. Particular consideration is given to
the differing ways top and middle managers in a firm may experience causal ambiguity and to
how these differences may be understood and managed.