Operational Capability: The Missing Link between Supply Chain Practices and Performance

Abstract

The relationship between supply chain practices and business performance has been widely investigated by many academics and practitioners; however, the relationship is not yet fully understood. Therefore, this paper aims to examine the relevance of several prominent theories in strategic management for explaining the mediating role of operational capability in the relationship between supply chain practices and business performance. The resource-based view of the firm and neo-institutional theory are reviewed for their applicability to relate supply chain practices and operational capability in explaining sustained business performance. Supply chain practices are insufficient to drive business performance. Firms need to be able simultaneously to increase efficiency through supply chain practices and to be innovative through operational capability. Specifically, operational capability is forwarded as a key firm-specific capability that can result in significant and long-term improvement in organisational sustainability. Operational capability can serve as a critical mediating factor that better transmits the ambitions of supply chain practices onto business performance. As such, this paper provides a conceptual support to urge further research to empirically evaluate the relationship between supply chain practices, operational capability and business performance.