Modelling firm resources effects on performance: the mediating role of dynamic capabilities

Abstract

The extant literature has widely theorised that the exploitation of dynamic capabilities (DC), valuable, rare, inimitable and non-substitutable (VRIN) resources, contributes to the organisation’s performance. However, their operationalisation has been insufficiently tested in the franchising industry, based on previous theoretical and empirical studies (for example, Mumdziev & Windsperger, 2011:449; Gillis, Combs & Ketchen, 2013:449; Akremi, Perrigot & Piot-Lepetit, 2015:145; and the like.). Drawing on the resource-based view of the firm (RBV) and dynamic capabilities, this study sought to extend, replicate and advance knowledge and understanding of the RBV model as conceptualised in literature (Penrose, 1959:25; Barney, 1991:99; Morgan, Vorhies & Schlegelmilch, 2006:624; Newbert, 2008:747; Lin & Wu, 2014:410). Hence, the study modelled the relationship between VRIN resources and firm performance, and the mediating role of dynamic capabilities. Hypotheses were developed and the data were collected from franchisees (managers) of Gauteng metropolitan outlets using qualtrics, face-to-face and telephone methods. The analysis on a sample of 224 fast-food and retail franchisees was done through structural equation modelling. The findings show that all the VRIN empirical indicators are significant predictors of performance, p < .001. Dynamic coordinating capability can mediate the relationship between valuable resources and firm performance. In addition, the dynamic sensing capability was found to have a positive significant mediating effect between valuable resources and firm performance. Hence, these findings support the RBV assumptions. However, the dynamic sensing and the dynamic coordinating capabilities cannot mediate the relationship between other (rare, inimitable and non-substitutable resources) predictors and performance. Moreover, the dynamic learning and the dynamic integrating capabilities have an insignificant mediating effect between all the VRIN resources and performance.