Capability sequencing: strategies by township and village enterprises in China

Purpose – This study aims to identify and assess the strategies of township and village enterprises in China to capture competitive advantages. Design/methodology/approach – The paper employs a self‐administered questionnaire survey approach, involving a sample of managing directors of township and village enterprises in the Fujian Province, China. Findings – The analysis identifies the causal linkages across time between firms' different capabilities. Labor‐intensive industries and rural locations offer township and village enterprises (TVEs) opportunities to create capabilities to minimize costs. The cost minimization and systematic learning capabilities, in turn, lead to low‐priced innovator positioning. It also suggests that the co‐evolution and co‐existence of different capabilities contribute to capability inimitability. Research limitations/implications – Future studies on Chinese TVEs should expand the empirical database and include TVEs in underdeveloped areas and to investigate how firms survive within severe resource limitations. Practical implications – The findings of this study indicate that dynamic capabilities are important not only for firms in rapidly changing environments, but also for those in relatively stable industries, such as labor‐intensive industries. Firms should develop different capabilities over time and combine these into complex capabilities bundles. Originality/value – The findings from this study indicate that firms in developing countries can achieve cost leadership and differentiation, but the route to the destination has a path‐dependent history.