THE MODERATING EFFECT OF PRODUCT MARKET DYNAMICS ON THE RELATIONSHIP BETWEEN COMPETITIVE ADVANTAGE AND FIRM'S OPERATIONAL PERFORMANCE

Abstract

This paper investigates the relationship between competitive advantage and firm’s equity composition, based on metrics contained at the financial statement structure and operational performance considering endogenous origin (firm’s equity composition) or exogenous origin (sector’s dynamism degree). Furthermore, it verifies the exogenous characteristics that moderate the relationship between endogenous characteristics and firm’s operational performance. The study sample consists of 481 companies with quarterly data from 1998 to 2016, extracted from Economatica^® database. The applied technique is a hierarchical model approach with repeated measures involving nested series regressions analysis, estimated by maximum likelihood. The results suggest that the idiosyncratic resources captured by the firm's accounting measurement models have a greater capability to explain operational performance when compared to the characteristics of the environment in which it operates. It was also verified that the idiosyncratic resources of the firm, captured by the accounting measurement models, are sensitive to the characteristics exogenous to the firm. The moderation of sector’s degree of dynamism reverses the relationship between the firm's idiosyncratic resources and operational performance.