Title: Competitive advantage and firm performance: the moderating effect of industry forces

Authors: Jeen Wei Ong; Hishamuddin Ismail; Peik Foong Yeap

Addresses: Faculty of Management, Multimedia University, Cyberjaya Selangor, Malaysia ' Faculty of Business, Multimedia University, Cyberjaya Selangor, Malaysia ' Faculty of Business and Law, University of Newcastle Singapore, Valley Point, Singapore

Abstract: This study aims to examine the moderating effect of industry competitive forces on the relationship between competitive advantage and firm performance. Previous researches have concluded that competitive advantage leads to superior performance but the impact is limited. A possible reason is that the economic value created by firms is appropriated by other stakeholders. This study hypothesises that the five industry competitive forces moderate the relationship. 517 usable responses were collected from small and medium enterprises (SMEs) in Malaysia to test the research framework developed. The results show that buyer bargaining power, supplier bargaining power and threat of new entrants moderate the effect of competitive advantage on firm performance. Surprisingly, SMEs with differentiation advantage and cost advantage are able to appropriate more economic value when the buyers and suppliers have strong bargaining power respectively. On the other hand, the threat of new entrants reduces the economic value that SMEs can capture.

Keywords: competitive advantage; firm performance; small and medium enterprises; SMEs; industry competitive forces; moderating effect.

DOI: 10.1504/IJBPM.2018.095069

International Journal of Business Performance Management, 2018 Vol.19 No.4, pp.385 - 407

Received: 31 May 2016
Accepted: 12 Mar 2017
Published online: 01 Oct 2018 *

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