Capabilities as a mediator linking resources and the international performance of entrepreneurial firms in an emerging economy

This study investigates an under-researched topic: the relationships between capabilities, resources, and international performance among entrepreneurial firms in an emerging economy. We combine the resource-based view of the firm and the capability-building perspective of rent creation to shed light on the crucial role of firm-specific capabilities that transform key resources into performance outcomes. Employing a large sample of Chinese entrepreneurial firms, our investigation demonstrates that while the resources of institutional capital and managerial ties are important in the internationalization effort, their effects on international performance are channeled through each firm's adaptive capability. This adaptive capability is the firm's ability to coordinate, recombine, and allocate resources to meet the different requirements of foreign markets. Specifically, our research is able to demonstrate support for the mediating role of capabilities in the relationship between resources and international performance. The implications of these findings for theoretical development and future research are discussed.