The effects of different types of firm capabilities on firm performance in economic recession and expansion periods in construction firms

Although various studies have been conducted to explain the effects of firm capabilities on firm performance, it is still unclear whether different types of organizational capabilities contribute to higher organizational performance for firms under periods of economic recession compared to the periods of economic expansion. The aim of this study is to investigate the effects of technological, governance and political capabilities on firm performance in the period of economic recession (i.e., during economic crisis) and in the periods of economic expansion (i.e., before the economic crisis and after the economic crisis periods). For this purpose, five hypotheses have been developed using resource-based theory, transaction cost theory and resource dependence theory. In this study, Turkish contractor firms, which operated in the construction industry are examined. Data were collected from companies via questionnaires. In addition, secondary resources were also used to collect data for political capability by means of autobiographies of firms' owners, journals of the construction industry, economy and business journals, and newspapers and firms' annual announcements. Hypotheses were tested by ordinary Least Squares (OLS) multiple regression analysis. The findings indicate that technological capability, governance capability, and political capability (measured by survey data) each significantly affect firm performance for all the periods. The findings further indicate that the relative importance for firm performance of these capabilities both with respect to different economic periods and to each other in the same economic period depends on, or differ by, the economic period examined and the way that the political capability was operationalized (by survey vs. secondary data). Overall, especially for the period of after-the-crisis expansion, the findings are largely consistent with the hypotheses developed, except those developed for political capabilities, the results of which partly depend on its measurement.