The Relationship between Competitive Strategy and Firm Performance in Micro and Small Businesses in Ghana: The Moderating Role of Managerial and Marketing Capabilities

Abstract

This study investigates the role of managerial and marketing capabilities in moderating the relationship between competitive strategy and firm performance using data from 581 micro and small businesses (MSBs) in Ghana. Using a hierarchical multiple regression analysis the findings indicate that while differentiation strategy is related to performance, cost leadership strategy does not influence performance after controlling for several firm-specific factors. The findings further show that both managerial capability and marketing capability moderate the relationship between competitive strategy (cost leadership and differentiation) and performance for MSBs in Ghana. However, managerial capability strengthens the influence of cost leadership strategy on performance, while it weakens the impact of differentiation on performance. Moreover, marketing capability augments the impact of differentiation on performance, while it diminishes the influence of cost leadership on performance. The findings indicate a contingency approach to the implementation of competitive strategy by MSBs.