Dynamic Capabilities and Competitive Advantage into Mexican Firms: Testing Gibrat’s Law

This paper inquires into the existence of dynamic capabilities and competitive advantage in Mexican firms. Dynamic capabilities refer to the particular nonimitability capacity firms possess to shape, reshape, configure, and reconfigure their assets so as to respond to changing technologies and market conditions for escaping the zero-profits condition. In turn, competitive advantage refers to the capacity of firms for acquiring economic rents. In this sense, dynamic capabilities and competitive advantage are likely to be essential to the survival of firms in markets characterized to be innovative and in rapid technology change. It is argued that local firms ought to stimulate their own dynamic capabilities to successfully compete in markets. On the other hand, foreign firms would eventually transfer their own capabilities (technology and know-how) to local subsidiaries to successfully compete in these markets. Making use of econometric methods, we analyze firm performance in relation to the Law of Proportionate Effects in order to test for the existence of dynamic capabilities into firms in Mexico.