While most studies examine the effect of marketing, innovation, and learning capabilities (often separately) on performance, this study develops a unified model to investigate the combined effect of these capabilities on performance. This study further examines the complementary effect of these capabilities on performance. This study draws on the resource-based view theory to examine 171 manufacturing SMEs. The findings suggest that marketing, innovation, and learning capabilities are positively related to SME performance. In addition, these capabilities interact with one another to create great synergy in achieving SME performance.
Superior innovation capability is a key contributor to firm performance. The capacity to innovate can assist firms in the process of developing superior products to meet their customers’ changing needs and demands (Verhees and Meulenberg, 2004, Li and Mitchell, 2009 and Rosenbusch et al., 2011) which is a requirement to succeed in the marketplace. Furthermore, firms must also possess superior marketing capability to bring their products to the marketplace faster and serve the customers better than their rivals (Vorhies and Morgan, 2005 and O’Dwyer et al., 2009). However, in addition to innovation and marketing capabilities, firms must also possess superior learning capability to analyze their successful and unsuccessful activities in developing and launching the products as well as to acquire new knowledge so that improvement can be made and new ways of working more closely with customers are identified (Chaston et al., 2001 and Prieto and Revilla, 2006). Building on these contentions, this study takes the view that innovation, marketing, and learning capabilities are the key capabilities for firms in their efforts to achieve superior performance. While these three key capabilities are potentially related in their contribution to firm performance, research that simultaneously investigates their effects on firm performance is still scarce. More importantly, the literature is almost silent on their complementary nature and the possibility of their complementary effect on firm performance. This leaves an important source of advantage for firms largely unexplored (Newbert, 2007 and Vorhies et al., 2009).
Using the Resource Based-View (RBV), this study addresses the current shortfall in the literature on complementary capabilities, internal capability deployment and firm performance in a unified framework. This study examines the individual effect of innovation, marketing and learning capabilities as well as their complementary effect on the performance of Small and Medium Enterprises (here after SMEs) in a single model. This study contributes to the literature by showing that simultaneously developing superior innovation, marketing, and learning capabilities provides SMEs with a complementary effect, which is a significant strategy to prevent competitors from imitating firms’ capabilities and enhances marketplace outcomes.
The findings of this study offer several contributions to the literature the managerial practices. The findings showing the significant main effects of innovation capability, marketing capability and learning capability on SME performance simultaneously support a theoretical proposition that these three related capabilities are the key contributors of SME performance. The findings signify the importance of these three key capabilities as precursors of financial performance in SMEs. Importantly, this study extends previous research which either focuses on large firms or separately examines innovation capability (e.g., Hurley and Hult, 1998 and Rosenbusch et al., 2011), marketing capability (e.g., Vorhies and Morgan, 2005 and O’Dwyer et al., 2009) and learning capability (e.g., Chaston et al., 2001 and Garcia-Morales et al., 2006) by examining this three key capabilities in a unified model particularly focusing on SMEs.
Significantly, the finding of complementary effects between innovation, marketing and learning capability (in addition to their individual effect) on SME performance is particularly interesting. This finding contributes significantly to an extension of RBV theory on complementary capability effects, a point which is also highlighted by Newbert (2007) and affirms the view of Wind, 2005 and Lau et al., 2010 that a firm’s ability to develop and deploy various internal capabilities (e.g., innovation, marketing and learning) is of significance for continued growth and profitability. This findings highlight that some SMEs may perform better than others in the marketplace may not rest totally on how well they develop and deploy a specific individual capability, but also because they possess capabilities that are complementary to each other and are characterized as possessing asset interconnectedness. Past research, investigated capability complementarities (Song et al., 2005 (technology capability–marketing capability), Menguc and Auh (2006) (MO–innovativeness) and Morgan et al. (2009) (MO–marketing capability)). This study extends past research by examining the complementary effect of innovation capability, marketing capability, and learning capability on the SME performance. The findings reaffirm the view that, regardless of the size and the context of firms operating in, doing more of one thing increases the returns to the firm of doing more of another in the context of capabilities sets.
The results provide managers practical implications that in the quest for building superiority in the marketplace, SMEs must pay attention to developing these three key capabilities. Further, due to the fact that markets in the emerging economies including Cambodia are getting saturated and experiencing the influx of competitions, managers of SMEs must ensure that they constantly offer new products, seek for new ways/channels to get the products to the markets more quickly and serve the customers better than others as well as keep analyzing their business activities (particularly their unsuccessful ones) so that improvement can be made. Thus, aligning these three capabilities to achieve superior performance is critical for SME managers. Once the managers can develop and deploy innovation, marketing and learning capabilities simultaneously and effectively, they can obtain the right messages from the markets and deliver the right products to the customers. These outcomes serve as the bases for achieving SME performance.
