There has been much debate in the strategy literature as to whether organizational capabilities or market competition are more important in shaping firms’ actions and outcomes but this debate has generated little consensus
We suspect that simply comparing firm-level and industry-level influences will continue to prove fruitless for two reasons. In the first place, both organization and competition are clearly important in shaping strategy and performance.
In the second place, we suspect that the inconclusive nature of much of the existing research reflects the fact that organizational capabilities, competition, strategy, and performance are fundamentally endogenous. That is, reciprocal interactions at multiple levels of analysis between the market environment and firm capabilities shape business strategy and performance, while interactions between strategy and performance, in turn, shape both organizational capabilities and competitive environments.