The Causal Links among Market Fitness, Organizational Process and Performance: Empirical Evidence from Taiwan’s Electronics Industries

Measuring dynamic capabilities and estimating their consequences on performance are challenging as they are naturally complex and multi-dimensional. This study aims to investigate the effect of a firm’s market engagement on performance, and its role in linking firm internal processes and performance. This study focuses on the mediating role of market fitness in order to empirically clarify how a firm’s organizational procedural capabilities drive its performance. For empirical analysis, this study conducts path analysis on a ten-year-long panel dataset with 413 listed companies across Taiwan’s electronics industries. The major contribution of this study to strategic management literature is that this study operationalizes the microfoundations of dynamic capabilities for both organizational processes and market fitness based on return on invested capital. The measures developed for the present analysis can be viewed as a set of yardsticks for empirically drawing the performance of dynamic capabilities.

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