DYNAMIC CAPABILITIEs AND COMPETITIVE ADVANTAGE INTO MEXICAN FIRMs: TEsTING GIBRAT’s LAW

Abstract

This paper inquires into the existence of dynamic capabilities and competitive advantage in Mexican firms. Dynamic capabilities refer to the particular nonimi-tability capacity firms possess to shape, reshape, configure, and reconfigure their assets so as to respond to changing technologies and market conditions for esca-ping the zero-profits condition. In turn, competitive advantage refers to the capa-city of firms for acquiring economic rents. In this sense, dynamic capabilities and competitive advantage are likely to be essential to the survival of firms in markets characterized to be innovative and in rapid technology change. It is argued that lo­cal firms ought to stimulate their own dynamic capabilities to successfully compete in markets. On the other hand, foreign firms would eventually transfer their own capabilities (technology and know-how) to local subsidiaries to successfully com­pete in these markets. Making use of econometric methods, it is corroborated the relation between firm performance (Law of Proportionate Effects) and dynamic capabilities into firms in Mexico.