The relationship between strategic type and firm capabilities in Chinese firms

Proposes that firms of different Miles and Snow strategic types will have different bundles of firm‐level capabilities; that is, certain capabilities will be more important to certain strategic types. Specifically, proposes that prospectors have greater relative inside‐out capabilities and information technology capabilities, while defenders have greater relative outside‐in capabilities and marketing capabilities. Empirically tests, and finds support for, the propositions using a data set of 245 Chinese firms, comprised mostly of state‐owned enterprises. Understanding the Chinese business environment is of importance to businesses around the world as the Chinese economy undergoes rapid expansion and decentralization of strategic decision making to the level of the state‐owned enterprise. As the central government takes on a lesser role in the management of enterprises, and Chinese enterprise managers become more responsible for their own strategic decision making, a clear understanding of the enterprise's specific capabilities and advantages is required in order to achieve sustained competitive advantage. Concludes by discussing managerial implications.