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Competitive advantage and firm performance: the moderating effect of industry forces

Author

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  • Jeen Wei Ong
  • Hishamuddin Ismail
  • Peik Foong Yeap

Abstract

This study aims to examine the moderating effect of industry competitive forces on the relationship between competitive advantage and firm performance. Previous researches have concluded that competitive advantage leads to superior performance but the impact is limited. A possible reason is that the economic value created by firms is appropriated by other stakeholders. This study hypothesises that the five industry competitive forces moderate the relationship. 517 usable responses were collected from small and medium enterprises (SMEs) in Malaysia to test the research framework developed. The results show that buyer bargaining power, supplier bargaining power and threat of new entrants moderate the effect of competitive advantage on firm performance. Surprisingly, SMEs with differentiation advantage and cost advantage are able to appropriate more economic value when the buyers and suppliers have strong bargaining power respectively. On the other hand, the threat of new entrants reduces the economic value that SMEs can capture.

Suggested Citation

  • Jeen Wei Ong & Hishamuddin Ismail & Peik Foong Yeap, 2018. "Competitive advantage and firm performance: the moderating effect of industry forces," International Journal of Business Performance Management, Inderscience Enterprises Ltd, vol. 19(4), pages 385-407.
    • Handle: RePEc:ids:ijbpma:v:19:y:2018:i:4:p:385-407
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    Cited by:

    1. Kang Tan & Abu Bakkar Siddik & Farid Ahammad Sobhani & Muhammad Hamayun & Mohammad Masukujjaman, 2022. "Do Environmental Strategy and Awareness Improve Firms’ Environmental and Financial Performance? The Role of Competitive Advantage," Sustainability, MDPI, vol. 14(17), pages 1-24, August.

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