Empirically eliciting complementarities in capabilities: integrating quasi-experimental and panel data methodologies

Abstract

Resource-based researchers are finding considerable support for the association between the creation and application of organizational capabilities and competitive advantage. However, measuring organizational capabilities presents empirical researchers with substantial difficulties. This study proposes quasi-experimental research design and panel data estimation techniques for future empirical work on capabilities: this approach takes advantage of more easily measured resources transferred in the strategic factor market to elicit what otherwise would be unknowable capabilities. This approach also allows researchers to uncover how, when building organizational capabilities through factor market resource acquisitions, firms differ significantly in their ability to leverage tangible and intangible complementary resources to enhance the operational performance of acquired resources. This empirical approach is illustrated through an investigation of the US international airline industry from 1983 to 1992, during which time the industry experienced a significant transfer in the rights to operate US international routes. The results of the analysis demonstrate how quasi-experimental design, when coupled with panel data estimation techniques, is a powerful econometric strategy for researchers interested in modeling heterogeneity in firm capabilities.