Firm competitiveness: A general model and a manufacturing application

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Abstract

Competitiveness of firms is studied mostly from a strategic management perspective. It is only rarely a subject of analysis from the viewpoint of operations. In this paper, we aim to connect these two approaches using the resource-based view of the firm, popularly called RBV theories. First, we provide a comprehensive definition of firm competitiveness and propose a conceptual index (Firm Competitiveness Index or FCI) to measure it, based on the theory of dynamic capabilities. Further, we demonstrate the use of the FCI concept, with an application to the Hungarian manufacturing sector, utilizing survey responses from a sample of 113 firms collected as part of an ongoing research project focusing on competitiveness of the Hungarian industry. We employ exploratory- and confirmatory factor analysis to construct a context-specific FCI indicator on this sample. Finally, we explore the relationship between the constructed FCI, and thus a concept of competitiveness, and capabilities of the production area. Hierarchical regression analysis is employed to investigate this relationship. We posit this as a means to empirically test the perceived contribution of functional areas to the overall firm-level competitiveness. We find a positive impact of the dynamic production capabilities on the firm’s perceived competitiveness but find no significant relationship between ordinary production capabilities and firm-level competitiveness.