Operational Capabilities: The Secret Ingredient

Abstract

We develop a theoretical definition of operational capabilities, based on the strategic management and operations management literature, and differentiate this construct from the related constructs of resources and operational practices, drawing upon the resourcebased view of the firm as our foundation. We illustrate the key features of operational capabilities using the illustration of a restaurant kitchen. Because the traits of operational capabilities are distinct, they create a barrier to imitation, making them a potential source of competitive advantage. However, operational capabilities are particularly challenging to measure, because they emerge gradually and are tacit, embedded, and manifested differently across firms. In solving this measurement conundrum, we draw upon similar situations experienced by Schein (2004) and Eisenhardt and Martin (2000) in operationalizing organizational culture and dynamic capabilities. A taxonomy of six emergent operational capabilities is developed: operational improvement, operational innovation, operational customization, operational cooperation, operational responsiveness, and operational reconfiguration. A set of measurement scales is developed, in order to measure each of the operational capabilities, and validated using two different datasets. This allows replication of the psychometric properties of the multi-item scales and helps to ensure the validity of the resulting measures.