Alexander Krasnikov & Satish Jayachandran

The Relative Impact of Marketing,

Research-and-Development, and
Operations Capabilities on Firm
Performance
The impact of the marketing function on firm performance has been the focus of much recent research in marketing.
Thus, the effect of marketing capability on firm performance, compared with that of other capabilities, such as
research and development and operations, is an issue of importance to managers. To examine this issue and
generate empirical generalizations, the authors conduct a meta-analysis of the firm capability–performance
relationship using a mixed-effects model. The results show that, in general, marketing capability has a stronger
impact on firm performance than research-and-development and operations capabilities. The results provide
guidelines for managers and generate directions for further research.

Keywords: marketing capability, research-and-development capability, operations capability, meta-analysis, mixed-

effects model, firm performance, capability–performance relationship

apabilities are complex bundles of skills and knowl- ings gains generated through cost cutting and efficient

C edge embedded in organizational processes (Helfat

and Peteraf 2003). They are critical sources of sus-
tainable competitive advantage used by firms to leverage
their assets and achieve superior performance. Capabilities
serve as the “glue” that binds different resources together
and enables them to be deployed to maximum advantage
(Day 1994, p. 38). The role of marketing capability in dri-
ving superior firm performance has been of significant
interest to marketing scholars (e.g., Capron and Hulland
1999; Day 1994; Grewal and Tansuhaj 2001; Vorhies and
Morgan 2005). However, empirical research that directly
examines the impact of a firm’s marketing capability on
performance, compared with the impact of capabilities in
other functional areas, such as research and development
(R&D) and operations, is scarce. This leaves unresolved the
issue of whether marketing capability has a greater or lesser
influence on firm performance than other capabilities.
The relative importance of marketing capability in dri-
ving performance is a significant issue in light of the con-
cerns expressed about the role of marketing in building firm
value (Srivastava, Shervani, and Fahey 1998, 1999). In a
recent story about the stock price of the retail firm
RadioShack, the Wall Street Journal commented that earn-
Alexander Krasnikov is Assistant Professor of Marketing, Department of
Marketing, School of Business, George Washington University (e-mail:
avkrasn@gwu.edu). At the time of writing, he was a postdoctoral research
fellow, Kellogg School of Management, Northwestern University. Satish
Jayachandran is Associate Professor of Marketing and Moore Research
Fellow, Department of Marketing, Moore School of Business, University of
South Carolina (e-mail: satish@moore.sc.edu). The authors thank Kelly
Hewett, Robert Ployhart, and Chris White for their comments and assis-
tance in developing this article.
operations are less sustainable and, thus, less valuable than
earnings gains from a revenue increase (Zuckerman and
Hudson 2007). This comment implies that the payoff from
emphasizing capabilities that result in lower costs and more
efficient operations could be different from that obtainable
by focusing on capabilities that result in revenue growth.
Therefore, research providing empirical generalizations for
the relationship of different types of capabilities to perfor-
mance and an examination of how they vary would benefit
managers and academics.
Despite a significant volume of research on the relation-
ship of capabilities to performance, the findings regarding
this relationship often vary substantially in terms of magni-
tude. The predominant view in prior research is that capa-
bilities are positively associated with performance (Day
1994). Nevertheless, several studies report that capabilities
can turn into core rigidities and might even have a negative
influence on some aspects of firm performance (e.g., Haas
and Hansen 2005; Leonard-Barton 1992). Therefore,
empirical generalizations from previous research would
also help assess the overall impact of firm capabilities on
performance and highlight study characteristics that may
cause variation in the relationship.
To address these objectives, we conduct a meta-analytic
assessment of the capability–performance relationship. In
doing so, we focus on three types of capabilities: marketing,
R&D, and operations. Marketing capability represents a
firm’s ability to understand and forecast customer needs
better than its competitors and to effectively link its offer-
ings to customers (market sensing and customer-linking
capabilities; Day 1994). Research-and-development capa-
bility is a firm’s competency in developing and applying
different technologies to produce effective new products

© 2008, American Marketing Association Journal of Marketing

ISSN: 0022-2429 (print), 1547-7185 (electronic) 1 Vol. 72 (July 2008), 1–11
and services. Operations capability is the skills and knowl-
edge that enable a firm to be efficient and flexible producers
or service providers that use resources as fully as possible.
We recognize that capabilities can be characterized in
other ways, such as classifications that employ a more
micro approach (e.g., customer-relating capability; Day
2000). Our interest in marketing, R&D, and operations
capabilities is shaped by two issues, one fundamental and
the other practical. The fundamental issue is that marketing,
R&D, and operations are core organizational functions
involved in developing and implementing a strategy that
results in sustained advantage. For example, Treacy and
Wiersema (1993) argue that superior customer value can be
delivered through operational excellence, customer inti-
macy, and product leadership. These strategies are evidently
related to operations capability, marketing capability, and
R&D capability, respectively. The practical issue is that in a
meta-analysis, we are limited by the availability of enough
studies that examine a particular relationship. Focusing on
marketing, R&D, and operations capabilities enables us to
overcome the sparse data problem caused by the lack of
availability of a sufficient number of prior studies that
examine the relationship of a particular capability to perfor-
mance. In effect, we do not claim that our categorization
of firm capabilities in the context of this meta-analysis is
exhaustive. Rather, the study summarizes the effect of the
most widely examined capabilities on performance.
Overall, this study seeks answers to the following
questions:
•What is the mean impact of capability on performance?
•Does the impact on performance vary for marketing, R&D,
and operations capabilities?
•What other study characteristics moderate the overall rela-
tionship between capabilities and performance?
As a preview, the empirical generalizations we derive
from prior research show that capabilities in general and
marketing, operations, and R&D capabilities in particular
are positively associated with performance. Using hierar-
chical linear modeling (HLM) and controlling for the effect
of other study characteristics, we demonstrate that market-
ing capability has a stronger influence on performance than
R&D capability and operations capability. This is an impor-
tant finding in the context of the discussion about the role
of marketing in firm value creation (e.g., Rust et al. 2004;
Srivastava, Shervani, and Fahey 1998, 1999). For example,
industry surveys often provide evidence that senior manage-
ment is unsure of the value of the marketing function and
therefore might be less inclined to invest in developing mar-
keting capabilities (e.g., O’Halloran 2004). The results from
the current research support Srivastava, Shervani, and
Fahey’s (1998) argument about the importance of marketing
assets for firm performance and highlight the potential folly
of not focusing on investments that build marketing capabil-
ity. Overall, by summarizing the results from a large body
of research, we provide findings that advance the dialogue
on the role of marketing in firms.
We organize the article as follows: We begin with a dis-
cussion of the theoretical issues related to capabilities
research and offer hypotheses. Then, we explain the devel-
2 / Journal of Marketing, July 2008
opment of the database for the meta-analysis. Following
this, we provide the analysis and present the results. Finally,
we discuss the implications and suggest future research
directions.
Capabilities and Performance
The resource-based view of the firm argues that resources
that differ in value, rarity, imitability, and sustainability are
at the root of competitive advantage (Barney 1991; Penrose
1959; Wernerfelt 1984). The resource-based view has had
an influence on the dialogue in the marketing strategy lit-
erature by helping researchers articulate the drivers of
competitive advantage (e.g., Bharadwaj, Varadarajan, and
Fahy 1993; Capron and Hulland 1999; Hunt and Morgan
1995). The capabilities perspective suggests that it is the
capabilities, more than the resources, that enable the
deployment and leveraging of resources that help some
firms perform better than others (Grant 1996; Teece,
Pisano, and Shuen 1997). Capabilities enable a firm to per-
form value-creating tasks effectively, and they reside in
organizational processes and routines that are difficult to
replicate. Capabilities are deeply rooted in these processes
and therefore are embedded within organizations in the
complex mesh of interconnected actions that follow mana-
gerial decisions over time. In effect, capability embedded-
ness, or its incorporation into the surrounding context, cre-
ates barriers to imitation, enabling firms to enjoy
sustainable advantage over their rivals (Grewal and Slote-
graaf 2007). In addition, Danneels (2002) proposes that
existing capabilities may serve as leverage points for the
development of new ones that help a firm sustain its perfor-
mance. Overall, capabilities are key determinants of a firm’s
competitive advantage and, thus, its performance (Day
1994). In general, the weight of arguments in prior research
supports a positive association between capability and
performance.
Capabilities have been demarcated according to their
different functional areas. In this article, we limit our atten-
tion to marketing, R&D, and operations capabilities and
their impact on performance. Fundamentally, marketing is
the function that is responsible for meeting customer needs.
Therefore, marketing capability is the organizational com-
petence that supports market sensing and customer linking.
As such, marketing capability spans processes that are
established within organizations to decipher the trajectory
of customer needs through effective information acquisi-
tion, management, and use. In addition, marketing capabil-
ity involves the processes that enable a firm to build sus-
tainable relationships with customers (Day 1994).
Research-and-development capability refers to the pro-
cesses that enable firms to invent new technology and con-
vert existing technology to develop new products and ser-
vices. Therefore, R&D capability depends on the routines
that help a firm develop new technical knowledge, combine
it with existing technology, and design superior products
and services. Operations capability is focused on perform-
ing organizational activities efficiently and flexibly with a
minimum wastage of resources. Therefore, these capabili-
ties are related to efficient manufacturing and logistics.
Overall, operations capability has been described as focus-
ing on efficient delivery of quality products and services,
cost, and flexibility (Tan et al. 2004).1
As we noted previously, capabilities are often not
explicitly visible. As such, the measurement of capabilities
has frequently been based on secondary proxy measures
that are considered their valid outward manifestations. For
example, marketing capability has been assessed using
measures such as market research and advertising expendi-
tures (e.g., Dutta, Narasimhan, and Rajiv 1999). Many other
studies have employed primary measures by developing
scales to quantify facets of marketing capability (e.g., Day
2000; Jayachandran, Hewett, and Kaufman 2004). The
measurement of R&D capability has also been approached
in a manner similar to that used in capturing marketing
capability. The most frequently used measure of R&D capa-
bility is based on R&D expenditure, which is often stan-
dardized relative to industry expenditures and expressed as
R&D intensity (e.g., Dutta, Narasimhan, and Rajiv 1999).
Rating scales have also been used to capture R&D capabil-
ity in studies in which primary data are employed (e.g.,
Song et al. 2005). Operations capability has been measured
through scales of its various dimensions, such as flexibility,
cost efficiency, and logistics (e.g., Tan et al. 2004). In addi-
tion, studies have employed primary measures of produc-
tion competence to assess operations capability (Vickery,
Dröge, and Markland 1997).
The performance measures to which capabilities are
related distinguish between two types of outcomes: market
performance and efficiency performance (e.g., Dutta,
Narasimhan, and Rajiv 1999; Eisenhardt and Martin 2000).
Market performance refers to measures such as market
share, profitability, and sales, whereas efficiency perfor-
mance refers to measures such as cost reduction, lead-time
reduction, and time to market.
In summary, prior research has examined the relation-
ship between capabilities and performance using various
approaches. The studies have used both primary and sec-
ondary data. There is some variation in the measures that
are employed to quantify different capabilities, though the
conceptual approaches to defining and articulating capabili-
ties are largely consistent. The variance in how the studies
are designed and how the constructs are measured is attrib-
utable to the broad theoretical sweep of the core construct,
namely, firm capability. Because conceptually broad phe-
nomena need to be studied over a diverse set of contexts, it
is considered appropriate to include studies that vary in sit-
uations and procedures when summarizing such research in
a meta-analysis (Hunter and Schmidt 1990). Indeed, a
meta-analysis of theoretically broad constructs that includes
studies that vary in context and methods would help assess
construct validity and the validity of an effect through trian-
gulation. Furthermore, a relationship that is supported under
various situations lends credence to its robustness (Hall et
al. 1993). In addition, to account for the variance in study
1Note that “quality,” as referred to in the context of operations
capability, is that of low-defect manufacturing quality and not
consumer-perceived quality, the more widely accepted notion of
the term in the marketing literature.
contexts and methods, salient study design factors can be
coded, and their moderating effect on the capability–
performance relationship can be tested. Next, we discuss
the various factors that cause variation in the
capability–performance relationship.
Impact of Different Types of
Capabilities and Other Study
Characteristics
The framework shown in Figure 1 outlines the potential
impact of different types of factors on the capability–
performance relationship. One primary factor that causes
variance in the capability–performance relationship is the
type of capability—that is, marketing, R&D, or operations.
In addition, we examine several other study characteristics
as potential moderators of the capability–performance
relationship.
Impact of Different Types of Capabilities
The impact of capabilities on performance is governed by
two characteristics of the knowledge that drives them: the
difficulty that rivals face in copying them (imperfect
imitability) and the difficulty they have in obtaining them
from the market (imperfect mobility). Marketing, R&D, and
operations capabilities may differ with respect to the
imitability and mobility of the knowledge that supports
them. Thus, and as we discuss in detail next, the impact of
these different capabilities on performance could vary.
Marketing capability is based on market knowledge
about customer needs and past experience in forecasting
and responding to these needs (Day 1994). Market knowl-
edge usually develops over time through learning and
experimentation. Simonin (1999) notes that a substantial
part of market knowledge is difficult to codify because of
its socially complex nature, implying that market knowl-
edge is distributed across multiple groups and people. The
assumptions of experiential learning and social complexity
of market knowledge suggest that, to a large degree, mar-
keting capability is based on knowledge that is tacitly held
and difficult for rivals to copy (imperfect imitability). Even
when market knowledge is codified and can be transmitted,
as in customer satisfaction measurement systems, the
knowledge is closely held, leading to imperfect mobility
(difficulty in obtaining this capability through a market sys-
tem). Overall, marketing capability is likely to be immune
to competitive imitation and acquisition because of the dis-
tributed, tacit, and private nature of the underlying
knowledge.
The knowledge and processes that underpin R&D capa-
bility and drive innovations are likely to be more codified
than the knowledge that supports marketing capability.
Technological developments are typically manifested in
inventions that are patented. In the patenting process, the
inventor must disclose critical information about the tech-
nology. Thus, even if the patent provides the inventor firm
with protection from copying, the codified knowledge dis-
closed enables a competitor to build on or around the origi-
nal invention (Anand and Khanna 2000; Levin et al. 1987).
Marketing, R&D, and Operations Capabilities / 3
 FIGURE 1
Theoretical Framework for the Meta-Analysis

Factors Affecting the Capability–Performance

Relationship

Capability Type (H1, H2)

•Marketing
•R&D
•Operations

Other Factors
•Market versus efficiency performance
•Large versus small firms
•Subjective versus objective data
•Business-to-business versus business-to-consumer
•Manufacturing versus service business
•U.S. versus non-U.S. firms
•Strategic business unit versus firm level
•Multiple versus single industry

Capability Performance

In comparison, there is no overt pressure to codify the
knowledge that supports marketing capability and to dis-
close it in the public domain. Further adding to the mobility
of R&D capability is the idea that to reduce R&D competi-
tion that might otherwise make innovation too costly, firms
might even license their discoveries to rivals (Anand and
Khanna 2000). Overall, this argument suggests that R&D
knowledge and processes are codified and shared to a
greater degree than the more tacitly held marketing knowl-
edge and processes. Therefore, in general, R&D capability
is likely to be more imitable and mobile than marketing
capability.
Operations capability is frequently based on processes
that have been benchmarked and codified. For example,
many firms have pursued total quality management and
international standards organization programs to enhance
quality and efficiency. Similarly, many firms have imple-
mented business process reengineering to redesign business
systems and work flow and to employ information technol-
ogy to enhance efficiency. The activities to be adopted by
organizations that followed total quality management and
international standards organization programs are codified
and certified, as well as aided by consultants. For business
process reengineering, companies also take advantage of the
expertise offered by consultants. Thus, some of the seminal
efforts that drove operations capability over the past two
decades were not necessarily based on firm-specific skills
but rather on skills that were available to all firms from the
external market. Pursuing capabilities based on codified
processes may not afford an organization the ability to
achieve competitive advantage. For example, Carr (2003)
argues that the core functions of information technology,
such as data processing and storage, are widely available
and largely affordable and therefore do not provide an
operations capability that leads to sustained advantage.
In effect, R&D capability and operations capability are
relatively more susceptible to imitation and are relatively
more mobile than marketing capability. This renders
competitive advantage based on these capabilities more
prone to competitive interference than advantage based on
marketing capability. However, note that though we argue
for the relatively stronger impact of marketing capability on
performance, we are not decrying the importance of R&D
capability and operations capability. There may be specific
industries in which R&D capability and operations capabil-
ity are more important than marketing capability. However,
our hypotheses are based on general findings and not
industry-specific or firm-specific findings. Our primary
contention is that given the nature of the knowledge that
drives these capabilities, marketing capability typically
leads to stronger performance than R&D capability and
operations capability.
H1: The capability–performance relationship is stronger for
marketing capability than for R&D capability.
H2: The capability–performance relationship is stronger for
marketing capability than for operations capability.
Other Study Characteristics That Influence the
Capability–Performance Relationship
To examine H1 and H2 in a meta-analysis, we need to
account for other study characteristics that might also influ-
ence the overall capability–performance relationship. Next,
we discuss the study characteristics that might affect the
capability–performance relationship.
Performance type. As we noted previously, prior
research has examined the role of capabilities in terms of
efficiency in integrating and reconfiguring resources (e.g.,
Dutta, Narasimhan, and Rajiv 1999; Eisenhardt and Martin
2000) and their impact on market outcomes (e.g., Vorhies

4 / Journal of Marketing, July 2008

and Morgan 2005). Therefore, the outcome of capabilities is
assessed using different types of metrics related to effi-
ciency performance and market performance. As such, in
coding the effect of capability on performance, we distin-
guish between efficiency performance and market
performance.
Large versus small firms. The link between organiza-
tional capabilities and performance may vary for firms
operating on different scales. Firm capabilities are deeply
embedded in organizational processes and routines (Day
1994). Larger firms have more idiosyncrasies in which mul-
tiple organizational routines coexist. Furthermore, larger
organizations are characterized by more complex routines
and processes, all of which would be more difficult for
competitors to imitate. Therefore, the capability–
performance relationship may be stronger for studies that
use samples of large firms (e.g., revenues or assets greater
than $500 million and also based on author classifications)
than for those that use samples of small firms.
Subjective versus objective data. The strength of the
relationship between capability and performance could vary
according to the type of data used in a study. Capabilities
are multidimensional and may not be adequately captured
by the proxy measures used in objective data collection.
Furthermore, because capabilities are deeply routed in orga-
nizational processes, subjective evaluations of experienced
decision makers may better capture their nuances. However,
the correlations obtained from subjective data coud be
inflated as a result of common methods bias. For these rea-
sons, the capability–performance relationship may be
stronger for subjective data than for objective data.
Industry type. It is fairly common in meta-analyses in
marketing to examine whether the impact of a particular
factor on firm performance varies with industry type (e.g.,
Kirca, Jayachandran, and Bearden 2005). Therefore, we
used the following study characteristics as moderators in
the analysis: whether the effect size is from samples of
manufacturing or services firms and whether the effect size
is from samples of business-to-business organizations or
business-to-consumer organizations. There is no a priori
reason to expect the effect sizes to vary in a specific direc-
tion according to these study characteristics.
Geographic context. Prior meta-analyses in marketing
have examined whether the relationship of interest varies in
terms of the geographic context of the data. Therefore, we
coded the studies according to whether the data were from
firms in the United States or otherwise (Asia, Australia, and
Europe). Again, there is no reason to expect the capability–
performance relationship to vary in a particular direction
according to geographic context.
Level of study. We also coded studies according to
whether the data were collected from samples of strategic
business units (SBUs) or firms. It is likely that SBUs would
be more closely identified with a specific capability, and
therefore studies with data from SBUs might exhibit
stronger capability–performance relationships.
Single versus multiple industry data. Whether a study
focuses on data from firms in a single industry or from
firms in multiple industries might also influence the
capability–performance relationship. Capabilities required
for success in different industries vary. When data are col-
lected within a single industry, it is likely that the capability
associated with success in that specific industry can be mea-
sured in a fine-grained manner. In contrast, when data are
collected from firms that operate in different industries, the
measurement of capability might need to be at a more
aggregate level, thus obscuring the relationship of capabil-
ity to performance. As such, the capability–performance
relationship could be stronger in studies that focus on one
industry than for studies with multi-industry data.
Database Development
In this section, we describe the procedures we followed to
develop the database for the meta-analysis. These proce-
dures are consistent with those used in previous meta-
analyses in marketing (e.g., Brown and Peterson 1993;
Kirca, Jayachandran, and Bearden 2005). First, to create a
comprehensive list of studies of the capability–performance
relationship, we conducted keyword searches of major elec-
tronic databases (ABI/INFORM, EBSCO, ScienceDirect,
JSTOR) using words and phrases such as “organizational
capabilities,” “competencies,” and “dynamic capabilities.”
Second, we searched the Social Sciences Citation Index for
studies that referenced the most-cited articles in the organi-
zational capabilities literature (e.g., Day 1994; Teece,
Pisano, and Shuen 1997). We also manually searched major
marketing and management journals in which articles on
organizational capabilities are most likely to be published
(e.g., Academy of Management Journal, Decision Sciences,
Journal of the Academy of Marketing Science, Journal of
Marketing, Journal of Marketing Research, Management
Science, Marketing Science, Strategic Management
Journal). In addition, we contacted several researchers and
requested working papers and forthcoming articles; we
posted a similar request on the electronic list servers for
marketing, management, and international business
academics.
The selection of studies for the meta-analysis was based
on several criteria. First, we chose empirical studies that
satisfied the previously discussed definitions of capabilities
(examples of different measures coded as capabilities
appear in the Appendix). Second, we selected studies that
measured capabilities at the organizational level. Finally,
we selected studies that provided the r-family of effects to
ensure that meaningful comparisons of effect sizes across
different studies could be conducted (Hedges and Olkin
1985). On completion of the search process in October
2007, we obtained 114 studies. Because we received few
unpublished studies, we included only published studies in
the meta-analysis. We calculated availability bias—that is,
the number of studies reporting null effects for the respec-
tive relationship that is necessary to reduce the cumulative
effect to the point of nonsignificance—to allay concerns
about the “file-drawer problem” (see Lipsey and Wilson
2001).2
2A full list of the studies included in the meta-analysis is avail-
able on request.
Marketing, R&D, and Operations Capabilities / 5
 To develop the final database, we again followed the
procedures outlined in recent meta-analyses in the market-
ing literature (e.g., Kirca, Jayachandran, and Bearden
2005). We developed a coding protocol to specify the type
of information to be extracted from the studies (Lipsey and
Wilson 2001). One of the authors and a doctoral student in
marketing who was not otherwise involved with the study
completed the coding. The two coders initially concurred
on approximately 85% of the coded data. Discussion
between the coders helped clarify disagreements and
achieve 98% consistency in the coding. The coding of dif-
ferent types of capabilities was consistent with their defini-
tions provided previously.3
After compiling the data, we adjusted the effects from
each study for unreliability using the approach that Hunter
and Schmidt (1990) recommend. We first divided the corre-
lations by the square root of the product of the reliabilities
of the two correlated constructs. Next, we transformed the
reliability-corrected correlations into z-values (Hedges and
Olkin 1985). Then, we calculated the weighted mean of the
z-scores using the inverse of their variance (N – 3) as
weight, where N is the sample size. Finally, we transformed
the z-scores back to obtain the revised correlation coeffi-
cients (Hedges and Olkin 1985).
Testing H1, H2, and the Impact of
Study Characteristics Using a
Mixed-Effects Model
To test the relative impact of marketing, R&D, and opera-
tions capabilities on the capability–performance relation-
ship (H1–H2), we used a mixed-effects model. The har-
vested effect sizes are nested within studies. Nested data
structures may lead to heteroskedasticity in the errors from
traditional regression analysis because correlations from a
study could be more “alike” than correlations from different
studies (Beretvas and Pastor 2003; Bijmolt and Pieters
2001). Thus, traditional regression analysis may not be
appropriate, because it could produce biased estimates. We
tested for heteroskedasticity (White 1980) and found that
the data were indeed of nonconstant error variance (χ274 =
207.40, p < .01). A potential remedy for this problem is to
average all effects sizes within a study and to use a tradi-
tional moderated regression analysis (e.g., Kirca, Jayachan-
dran, and Bearden 2005). However, Bijmolt and Pieters
(2001), Lipsey and Wilson (2001), and Raudenbush and
Bryk (2001) advocate the use of a mixed-effects model to
address the nested structure of the data and to produce more
generalizable results. Indeed, HLMs (a special case of
3For coding measures related to new product development capa-
bility, if a measure focused only on the technological component
of new product development (e.g., integration of technologies,
R&D capability), we coded it as R&D capability. However, if the
measure focused only on the marketing component of new product
development (e.g., matching changing needs of customers, market
development), we coded it as marketing capability. A few mea-
sures of new product development capability combined both mar-
keting and technological components of new product development
(e.g., Vorhies and Morgan 2005), and we excluded them from the
database to eliminate the risk of confounding.
6 / Journal of Marketing, July 2008
mixed-effects models) account for the nested structure of
the data by modeling within- and between-study variances.
The mixed-effects model we employed in this study
assumes that the two types of variations in effect sizes can
be explained by the type of capability and performance
variables, as well as other study characteristics. Thus, our
model is as follows:
(1a) Level 1: Z ij = β 0 j + β1 j × Χ1ij + β 2 j × Χ 2 ij
+ β3 j × Χ 3ij + ε ij , and
k
(1b) Level 2: β nj = γ n 0 + ∑γ nk × U kj + u nj ,
k =1
where Zij denotes the ith effect size reported within jth sam-
ple (j = 1 – 133) and β1j, β2j, and β3j describe parameter
estimates (slopes) for the three categorical variables X1j,
X2j, and X3j, such that
X1ij = 1 if the correlation is between R&D capability (R&D)
and performance and 0 if otherwise,
X2ij = 1 if the correlation is between operations capability
(OPER) and performance and 0 if otherwise, and
X3ij = 1 if the correlation is between capability and market
performance and 0 if the correlation is between capabil-
ity and efficiency performance.
The Level 1 equation (1a) describes the impact of dif-
ferent capability types and performance measures, which
vary at a study level, whereas the Level 2 equation (1b)
describes the effect of study characteristics on the intercept
and slopes in the Level 1 equation. The coding scheme was
as follows:
U1j = large (1) versus small (0) firms,
U2j = subjective (1) versus objective (0) data,
U3j = business-to-business (1) versus business-to-consumer
(0) data,
U4j = manufacturing (1) versus services (0) data,
U5j = U.S. (1) versus non-U.S. (0) data,
U6j = SBU (1) versus firm (0) data, and
U7j = multiple (1) versus single (0) industry data.4
In addition, γn0 (n = 0 – 3) represents the fixed effects in the
intercept and slopes βnj, and unj (n = 0 – 3) describes the
unexplained variance (between studies) in the intercept and
slopes after we partition the effects of study and sample
variables.
Results
We collected 786 effect sizes for the capability–
performance relationship from 114 studies, with a total
sample size of 30,645. The effect sizes ranged from –.56 to
–.82 in value. As we expected and consistent with prior
research, we obtained a significant, positive relationship
4The coding and analysis accounted for contingencies in which
some studies did not fit neatly into either of these categories (e.g.,
studies that were a mix of business-to-business and business-to-
consumer firms, studies that were a mix of manufacturing and ser-
vices business, and studies that had data from U.S. and non-U.S.
locations) by developing appropriate contrasts. None of these con-
trasts were significant.
between capability and performance (r = .283, p < .05). The Discussion and Implications
high numbers for availability bias (4501) suggest that
We designed the study to synthesize and analyze the empiri-
unpublished studies are not a serious threat to the validity of
cal findings on the relationships between different types of
the results. We obtained 319, 206, and 261 effects, respec-
firm capabilities and performance. In the process, we also
tively, for the relationships of marketing capability, R&D
delineated study characteristics that influence the generali-
capability, and operations capability to performance. The
zability of the findings from prior research. Overall, our
sample sizes for marketing capability–performance, R&D
analysis reveals that firm capabilities are positively associ-
capability–performance, and operations capability–
ated with performance over a diverse set of research con-
performance effects are 19,179, 15,766, and 14,675,
texts. An examination of the variance in these relationships
respectively.
using mixed-model analysis demonstrates that marketing
For the test of the hypotheses, we used the
capability has a stronger impact on performance than either
z-transformed values of reliability-corrected correlations
R&D capability or operations capability. To gain further
between capability and performance as the dependent
insights into this, we examined the bivariate correlations
variable. The relevant parameter estimates for the mixed-
between marketing, R&D, and operations capabilities and
effects model appear in Table 1.5 The results of contrasts
performance. Marketing capability had a stronger bivariate
(R&D capability versus marketing capability) indicate that
correlation with performance than R&D capability and
R&D capability (β = –.100, t-value = –3.25) has a lower
operations capability. The mean value for the marketing
impact on firm performance than marketing capability.
capability–performance relationship was .352, whereas the
Thus, H1 was supported. Similarly, we found that, in gen-
corresponding values for R&D capability and operations
eral, operations capability has a lower impact on perfor-
capability with performance were .275 and .205 (all signifi-
mance than marketing capability (β = –.164, t-value =
cant at p < .05). These results support the findings from the
–8.97). Thus, H2 was also supported. The capability–
mixed-model analysis. Among study characteristics, studies
performance effect sizes were higher for market perfor-
with subjective data demonstrated higher capability–
mance than for efficiency performance (β = .051, t-value =
performance correlations, as did studies that examined the
2.01). Consistent with our predictions, the analysis suggests
impact of capabilities on market performance compared
that effect sizes are stronger for subjective data than for
with those that focused on efficiency performance.
objective data (β = .172, t-value = 2.47). The other study
The topic of firm capability is of interest not only to
characteristics did not influence the capability–performance
scholars and managers in marketing but also to their coun-
relationship.
terparts in the areas of operations and R&D and to senior
managers. To the best of our knowledge, this is the first
5We first estimated the intraclass correlation coefficient (ρ), the
attempt to generalize findings in the organizational capabil-
proportion of within-study variance to the total variance (Rauden-
bush and Bryk 2001; Singer 1998; Snijders and Bosker 1994). The
within-study (σ2) and between-study (τ00) variance components els with random effects in different slopes and the intercept. The
are significant and equal to .054 (p < .001) and .067 (p < .001), mixed-effects model with random effects only in the intercept had
respectively. The intraclass correlation coefficient ρ derived from a better fit (–2LLR = 412.4, Akaike information criterion = 416.4,
these estimates was .55 (.067/.121), indicating that more than half and Schwarz’s Bayesian criterion = 421.9) than the model with
the observed variance was between studies and that a fair amount only fixed effects in the intercept and all slopes (–2LLR = 599.9,
of clustering of effect sizes occurred within studies. As such, the Akaike information criterion = 601.9, and Schwarz’s Bayesian cri-
use of HLM is appropriate in this context (Raudenbush and Bryk terion = 606.5). The models with random effects in the intercept
2001). We proceeded with the estimation of the HLM following and either slope or in the intercept and any two slopes did not
the approach that Raudenbush and Bryk (2001) and Singer (1998) demonstrate improvements in fit. Therefore, for hypotheses test-
outline. The model with random effects in the intercept and all ing, we used the model with random effects in the intercept and
three slopes did not converge. Thus, we analyzed alternative mod- fixed effects in the slopes.

TABLE 1
Variance in the Capability–Performance Relationship: Test of Hypotheses and Study Characteristics

Hypotheses d.f. β (t-Value)

Predictor Variables
R&D capability (X1) H1 669 –.100 (–3.25)*
Operations capability (X2) H2 669 –.164 (–8.97)*
Performance type (X3) 669 .051 (2.01)*

Sample Characteristics
Large (1) versus small (0) firms (U1) 103 –.016 (–.27)
Subjective (1) versus objective data (0) (U2) 103 .172 (2.47)*
Business-to-business (1) versus business-to-consumer (0) (U3) 103 –.051 (–.59)
Manufacturing (1) versus services (0) (U4) 103 .050 (.94)
U.S. (1) versus non-U.S. (0) (U5) 103 .039 (.62)
SBU (1) versus firm (0) (U6) 103 –.009 (–.14)
Multiple (1) versus single (0) industry (U7) 103 .023 (.30)
*p < .05.

Marketing, R&D, and Operations Capabilities / 7

ities literature through a meta-analysis. Firm capability is a
conceptually broad construct and therefore has been studied
in various contexts and using multiple methods. By summa-
rizing the research from multiple contexts and methods, we
help assess the validity and robustness of the capability–
performance relationship through triangulation (see Hall et
al. 1993). Moreover, by using a mixed-effects model, the
study provides a more accurate analysis of the factors that
cause variance in the capability–performance relationship
than would be possible with traditional multiple regression
analysis.
Limitations
Before we assess the implications of these findings, note
that this study may suffer from several limitations that are
common to other meta-analyses. First, we could not include
all available studies in the meta-analysis because our focus
was limited to studies that examined capabilities at the firm
or SBU level. Second, in selecting study characteristics that
influence the capability–performance relationship, we were
constrained to variables that could be coded from the infor-
mation provided in the studies. In addition, we could
include only capabilities for which the impact on perfor-
mance was studied frequently enough. Furthermore, it is not
feasible in the context of this study to determine whether
the dynamic nature of the market affects the relative asso-
ciation of different capabilities with performance. For
example, operations capability might be relatively more
important for performance in stable businesses than in
dynamic businesses. These limitations provide guidelines
for further research, which we discuss in greater detail
subsequently.
Managerial Implications
Because capabilities play a dominant role in achieving a
sustainable competitive advantage, managers would be
expected to design strategy to leverage firm capabilities.
The key finding in this study—that is, the significance of
marketing capability in terms of its ability to influence per-
formance more so than R&D and operations capabilities—
supports Srivastava, Shervani, and Fahey’s (1998, 1999)
argument that marketing assets are vital for a firm that
wants to augment its shareholder value. Our results are also
consistent with the previously noted observation in the Wall
Street Journal that earnings gain from cost cutting (opera-
tions capability) has a lower impact on sustained perfor-
mance than earnings gain from strategies that enhance reve-
nue growth (Zuckerman and Hudson 2007). The results
should also help address the concerns expressed in the busi-
ness media about the value generated by the marketing
function (e.g., O’Halloran 2004). The superior performance
impact of marketing capability underscores its ability to
generate tangible benefits, such as effective customer acqui-
sition and retention, by managing customer relationships
and being more responsive to customer needs. Therefore, on
the basis of the evidence from prior research, it may not be
advisable to reduce investment in marketing capabilities.
This result should also be of importance to senior manage-
ment concerned with rapid turnover of chief marketing offi-
cers (CMOs). The average CMO tenure in the top 100
8 / Journal of Marketing, July 2008
brand companies is approximately 23.2 months, compared
with 44.4 months for chief executive officers, 39.4 months
for chief financial officers, and 36.4 months for chief infor-
mation officers (Von Hoffman 2006). The rapid turnover
among CMOs and the consequent frequent changes in mar-
keting strategy could be detrimental to the cause of devel-
oping strong marketing capabilities. As such, efforts should
be focused on addressing the causes of CMO turnover in
firms.
Our results should not be interpreted to mean that
operations capability and R&D capability are unimportant;
rather, they should underscore the notion that marketing
capability, which is often jointly formed with customers
through relationships, is perhaps much less amenable to
competitive imitation or substituted by other forms of
competitive interference. Note also that both R&D capabil-
ity and operations capability have strong, positive associa-
tions with performance (.275 and .205, respectively). It
might be the case that marketing capability is more of a
“success-producing” capability whereas operations capabil-
ity and R&D capability tend to be “failure prevention”
capabilities (see Varadarajan 1985). In other words,
although the efficiency gains from operations capability and
new products are critical in ensuring that firms do not lag
behind competitors, these capabilities essentially enable
firms to keep rivals at bay. More sustainable competitive
advantage could emerge from a success-producing capabil-
ity, such as marketing capability.
We also found that the capability–performance relation-
ship is stronger for market performance than for efficiency
performance. To provide additional insights into this issue,
we examined the impact of different types of capabilities on
market and efficiency performance measures through con-
trast coding and HLMs in the same manner in which we
conducted the original analysis. From the HLM, we find
that marketing capability and R&D capability have stronger
relationships to market performance than operations capa-
bility (p < .05). An examination of the correlations also sup-
ports this result. Marketing capability and R&D capability
had weighted mean correlations of .355 and .315, respec-
tively, with market performance, whereas operations capa-
bility had a weighted mean correlation of .192 with market
performance. The HLM results also demonstrate that opera-
tions capability has a stronger effect on efficiency perfor-
mance than on market performance (p < .05). The corre-
sponding correlations for operations capability with
efficiency performance and market performance are .274
and .192, respectively. As such, it can be concluded that
operations capability primarily drives efficiency outcomes.
Overall, capabilities enable firms to reap greater relative
advantage in market performance than efficiency perfor-
mance. This might be a reflection of the notion that opera-
tions capability, which leads to greater efficiency and flexi-
bility, is more mobile through an external market than
marketing capability. Therefore, although operations capa-
bility might enhance efficiency performance, there is likely
to be greater parity among competing firms on such gains,
thus diminishing the ability to translate these gains into
market performance. For example, efficiency gains that
should result in a price advantage might be more easily
copied than the differentiation advantage that emerges from
marketing capability because of the greater imitability and
mobility of the knowledge that drives operations capability.
Research Implications
Despite the progress in explaining the capability–
performance relationship, several gaps in the understanding
of organizational capabilities can be addressed by addi-
tional empirical and theoretical research. We detail these
research directions next.
Complementary impact of different capabilities. The
results show that marketing capability has a greater impact
on performance than R&D capability and operations capa-
bility. However, prior research has addressed the issue of
firms developing multiple capabilities simultaneously and
the complementary effects of these capabilities on perfor-
mance. For example, Grewal and Slotegraaf (2007) show
how developing multiple capabilities might be counterpro-
ductive when these capabilities have opposing objectives
(minimization versus maximization). Conversely, Moorman
and Slotegraaf (1999) show that complementary capabilities
help enhance performance. These results are not necessarily
contradictory, because Grewal and Slotegraaf highlight a
specific contingency in which multiple capabilities do not
help. Thus, a case can be made for multiple, complementary
capabilities in some situations and single, focused capabili-
ties in other situations. However, in the context of a meta-
analysis, we are constrained in our ability to address this
issue in detail because of sparse data, and thus we encour-
age additional research in this area.
Context-based variation of the capability–performance
relationship. In the meta-analysis, we examined the impact
of several study characteristics on the capability–
performance relationship. However, other contextual issues
are of substantive importance but have not received suffi-
cient attention in the literature. For example, Eisenhardt and
Martin (2000) note that the nature of capabilities required to
drive firm performance is likely to vary with the “velocity”
or dynamism of the market. A direct test of this by Song
and colleagues (2005) finds that the impact of marketing
and technology capabilities on joint venture performance
varies with technological turbulence. Therefore, it is essen-
tial to examine directly whether market and technological
turbulence influence the relative impact of different capabil-
ities on performance. For example, operations capability
might be relatively more significant in stable markets than
in turbulent markets. This could be so because of the greater
need for slack resources, the very antithesis of efficiency,
for the rapid adaptation that is often required for success in
turbulent markets. Furthermore, in a new product develop-
ment context, R&D and marketing capabilities could be
more important than operations capability. Although we do
not have enough data to assess rigorously the value of dif-
ferent capabilities in a new product context, an examination
of the correlations for the studies in new product develop-
ment shows that marketing and R&D capabilities have a
stronger relationship to performance than operations capa-
bility (.359, .343, and .279, respectively). As such, we
encourage a direct, rigorous examination of the role of these
capabilities in a new product development context. In addi-
tion, the importance of more micro capabilities might vary
on the basis of the market condition. For example, under
what market conditions would pricing capability (Dutta,
Zbaracki, and Bergen 2003) be more critical than customer-
relating capability (Day 2000)? Research into marketing
capability should emphasize these issues following in the
tradition of prior research in this domain (e.g., Vorhies and
Morgan 2005).
Methodological issues. From a measurement perspec-
tive, we find that studies that use subjective data provide
higher correlations for capabilities with performance than
studies based on objective data. Although this could be
attributable to methods bias, it might also be the case that
the proxy measures that are employed in objective data col-
lection cannot get at the heart of measuring capabilities.
The limitations of secondary data to provide face-valid
measures might be especially pronounced when it comes to
assessing more complex capabilities. Thus, an assessment
of the metrics used to measure capabilities is required to
shed more light on this issue. Researchers should be cog-
nizant of these measurement-related issues when designing
future studies to separate effects of capabilities from arti-
facts of study design.
Marketing, R&D, and Operations Capabilities / 9
 APPENDIX
Examples of Coding of Different Types of Capabilities
Capability Examples of Coding
Marketing •Dynamic marketing capabilities (Caloghirou
et al. 2004)
•Marketing planning and implementation
capabilities (Vorhies and Morgan 2005)
•Marketing proficiency (Kim, Wong, and Eng
2005)
•Trust-building capability (Saini and Johnson
2005)
•Marketing intensity of multinational
enterprises (Kotabe, Srinivasan, and
Aulakh 2002)
•Advertising intensity (Anand and Delios
2002)
•Pricing and distribution capabilities (Zou,
Fang, and Zhao 2003)
•Customer service capability (Moore and
Fairhurst 2003)
•Customer response capability
(Jayachandran, Hewett, and Kaufman
2004)
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