Resources, capabilities and relationships: performance implications for palm oil processors

The thesis examines the role of resources, capabilities and relationship quality in contributing to business performance in the Malaysian palm oil processing companies from the Resource-based view (RBV) of the firm. The study used a mail survey and achieved a final sample of 330 palm oil processing companies, consisting of 283 milling, 31 refining, and 16 oleochemical companies. The total response rate was 69% The findings indicate that there are significant differences across milling, refining and oleochemicals in factors such as: access to up-to-date technology, corporate reputation, market orientation, innovativeness, manufacturing capabilities, commitment, and perceived market turbulence. The findings indicate that of the resources examined the two most important for predicting marketing effectiveness were the availability of raw materials and access to up-to-date technology. With respect to capabilities, the most important predictors of marketing effectiveness were market orientation and innovativeness. Relationship quality does not play a significant role in predicting market effectiveness, perhaps because most companies practise it within the context of Asian businesses. With respect to organisational capabilities that predict financial performance, the findings indicate that the most critical factor is organisational learning orientation. The aspects of relationships, trust and commitment are important predictors of financial performance. Resources do not have a significant direct effect on financial performance, although they have a significant effect on the achievement of strategic objectives. This indicates that the effects of resources are mediated by capabilities. The capabilities with the greatest direct effect on the achievement of strategic objectives are market orientation, learning orientation, and innovativeness. As regards relationships, the most important relational factor is trust in predicting the achievement of strategic objectives. In terms of a mediating role, relationship quality mediates the relationship between resources and organisational performance. The findings indicate that relationship quality is the key mechanism for transmitting the effects of resources, particularly raw material, and corporate reputation into performance outcomes. Relationship quality mediates the relationship between capabilities and organisational performance. The findings indicate that relationship quality is the principal mechanism for transmitting the effects of capabilities particularly in market orientation, learning orientation, and innovativeness into performance outcomes. The major contribution of this thesis is to fill the gaps in theoretical and empirical perspectives about the mediating role of relationship quality, in the relationships between resources and capabilities and performance outcomes. The contribution of this study relates to three important stakeholders: (1) academic contribution, (2) managerial implications, (3) policy initiatives. (1) Academic contribution From the perspective of academic contribution, it is important to enhance the theoretical understanding and empirical support for RBV of the firms and generalize the findings in the context of manufacturing sectors in agriculture commodities, particularly in the oils and fats industry. Another important contribution of this study is expanding the theoretical application by incorporating relationship quality constructs into the RBV as mediators in enhancing performance outcomes. This study aggregates three constructs such as trust, commitment and cooperation to form Relationship Quality. It contributes to a new explanation about the mediating effect of relationship quality on business performance. Furthermore, this study provides insights into the moderating effects of perceived market turbulence in the relationship between resources, capabilities, and relationship quality on business performance. The study contributes to a better understanding of the pattern of the moderating effect of market turbulence on resources, capabilities, and relationship quality and performance outcomes. (2) Managerial Implications The results should help managers to identify which resources, capabilities and aspects of relationships are important in enabling firms to operate efficiently and effectively in order to sustain competitive advantage and subsequently gain superior performance. The findings suggest that the key resources for success are the availability of raw materials and access to up-to-date technology. The main capabilities for success are market orientation, learning orientation, and innovativeness. The major aspects of relationships are trust and commitment. This is because relationship quality enhances the effect of resources and capabilities to achieve better business performance. The third important managerial implication is to advise managers as to the potential impact of market turbulence in influencing the relationship among organisational resources, capabilities, relationship quality and organisational outcomes in the Malaysia context, by suggesting conditions under which some resources may be optimally used. (3) Policy Initiatives The findings of this study were found to be very important for directors of the relevant authorities and to help these directors in formulating policy. Firstly, to provide useful information to the Malaysian Palm Oil (MPOB) and the Malaysian Palm Oil Council (MPOC) in identifying and understanding the key success factors of the palm oil processing companies. Secondly, the study provides useful information about the differences and similarities across the milling, refining and oleochemical sectors for MPOB and Ministry of Plantation Industries and Commodities Malaysia (MPIC). These findings may help them to develop guidelines on good business practices, and areas of possible assistance to this major industry in Malaysia