Exploring dimensions of firm competencies and their impact on performance

Abstract

Purpose – The purpose of this paper is to explore the dimensions of Indian manufacturing firms’ competencies and to study the impact of these competencies on firm performance. Design/methodology/approach – The authors have adopted a literature survey to identify variables and gaps in the research. Based on the construct and its item identified through the literature review the authors have developed a structured questionnaire which was pre-tested before being used for the final survey. The authors have collected data from 100 firms out of 275 targeted firms in two phases which represents a 36.36 per cent response rate. The data have been subjected to exploratory factor analysis (EFA) using varimax rotation, which reduced the data into seven parsimonious and orthogonal factors. The authors then carried out regression analysis using EFA output to test the relationship between six independent variables, representing competencies of the firm and performance. Findings – Findings show that EFA has reduced the data into seven factors, out of which six represent firm competencies and one represents firm performance. The competencies which have been identified are supply-demand coordination and product pricing, logistics, marketing, procurement, manufacturing simplicity and product quality and preventive maintenance. The EFA output was further tested using multiple linear regression analysis which shows that out of six competencies, four are positively supporting, except procurement which is negatively supporting and logistics which is found to be statistically insignificant. Research limitations/implications – The conclusive model suggests that there is considerable impact from other deterministic variables which are not assumed in the present study, and some of the variance has been accounted for by stochastic variables and response error. However, utmost care has been taken to minimise response error by personal follow-up with each of these firms. The outcome of the quantitative analysis provides an insight into firm competencies and their impact on firm performance. It is very important for the managers who are interested in deriving superior performance from their firm and focusing on supply-demand coordination and product pricing, manufacturing simplicity, marketing and product quality and preventive maintenance practices. Originality/value – This original study has been carried out by researchers in India on Indian manufacturing firms and adopted an EFA technique to identify dimensions which are unique in their contribution.