Firm capability and performance in China: The moderating role of guanxi and institutional forces in domestic and foreign contexts

This study examines the moderating effects of institutional forces on the capabilities-performance link by combining the resource-base view and institutional theory. From a survey of 324 Chinese manufacturers, this study tests the impacts of the importance of guanxi (an informal institutional factor) and legal support (a formal institutional factor) on the performance advantages of firm capabilities. The results indicate that both marketing and technology capabilities relate positively to performance, but the performance advantage of technology capabilities is less prominent when guanxi is important and the legal system is ineffective. In addition, guanxi importance strengthens the performance advantage of domestic firms' marketing capabilities but reduces that of foreign firms' marketing capabilities in China. (C) 2012 Elsevier Inc. All rights reserved.