Compositional capability as a mean to improve performance in an uncertain environment

Abstract

Dynamic capabilities are widely regarded to be critical to ensure the growth and survival of firms in an uncertain environment. Recently, the concept of compositional capability has been proposed which is described as the ability to skillfully integrate disparate resources to develop unique value propositions for the target market. Scholars regard compositional capability as a form of dynamic capability. The present study investigates the impact of compositional capability on a firm’s performance. Furthermore, it has been hypothesized that this effect is likely to improve in an uncertain environment. To test the conceptual model, data was collected from a cross-section of 185 retail stores located in Lahore, Pakistan through the survey. The collected data was later analyzed through Structural Equation Modelling. Results of the study reveal that compositional capability is positively associated with a firm’s performance. Also, compositional capability leads to superior firm performance under a highly uncertain environment. The paper discusses these findings and concludes with implications for future research.