Firm capabilities and the performance in regional polarization

Purpose: The purpose of this paper is to study the effect of firm-specific capabilities on performance in regional polarization. Design/methodology/approach: The study develops and tests a theoretical model relating regional economic characteristics and firm-specific capabilities to performance. Based on a survey conducted by the World Bank, data on 17,196 firms in 20 Latin American countries were constructed and analysed. Findings: The performance impacts of a firm's operations capability, technological capability and marketing capability were all found to be strengthened by operating in the Brazil-group economies – more favorable economic environments. Research limitations/implications: The findings confirm empirically that regional polarization has an important influence on firm performance. Moreover, these findings suggest a more nuanced understanding of the effects of firm-specific capabilities on firm performance. Some types of economies foster the effects of firm-specific capabilities and offer a favorable economic and institutional environment which can greatly stimulate firms to re-configure and develop their skills and improve their global competitiveness, leading to a better firm performance. Originality/value: As Robles has noted, “Given that polarization is a recent [development], there is [a] paucity of research on how firms cope with either expansionary or depressed domestic and global market conditions. There is little evidence of effective strategies and [their] performance implications in expansionary and contracting markets in the region.” This study addresses this important gap in the literature by demonstrating that operating in a country grouped with Brazil-type economies was positively related with firm performance.