Competencies and firm performance: examining the causal ambiguity paradox

• Published in: Strategic management journal 2001-01, Vol.22 (1), p.75-99
• Main Authors: King, Adelaide Wilcox, Zeithaml, Carl P.
• Format: Article
• Language: English
• Subjects: Ambiguity; Applied sciences; Business organization; Business structures; causal ambiguity; Causality; Chief executive officers; competencies; Competition; Competitive advantage; Core competencies; Corporate strategies; Correlation analysis; Enterprises; Exact sciences and technology; Executives; Financial performance; Firm modelling; firm performance; Hypotheses; Industry; inimitability; Knowledge; Knowledge management; Management; Middle management; Operational research and scientific management; Operational research. Management science; Organization theory; Organizational behaviour; Organizations; Paradoxes; Property rights; Random variables; resource-based theory; Strategic management; Studies; Textile industry; Textiles
• ISSN: 0143-2095; 1097-0266
• DOI: 10.1002/1097-0266(200101)22:1<75::AID-SMJ145>3.0.CO;2-I

Resource-based theory argues that resources must be valuable, rare, inimitable, and lack substitutes to confer competitive advantage. Inimitability is a lynchpin of resource-based theory and central to understanding the sustainability of 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. One perspective suggests that causal ambiguity regarding competencies and performance is necessary among internal and external managers for sustainable competitive advantage because it severely limits imitation. Causal ambiguity, therefore, enhances firm performance. Another view holds that causal ambiguity places a constraint on the transfer and leveraging of these competencies within a firm. In this case, causal ambiguity may adversely influence firm performance. This paper takes a resource-based view to develop and test hypotheses that relate 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 224 executives in 17 organizations provides valuable insights into the relationships between causal ambiguity and firm performance. A model is then developed based on these findings. 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.