Current interdisciplinary research suggests that organizational capabilities have a direct, unconditional impact on firm performance. The authors extend this literature by developing a framework that proposes a contingency approach to the value of organizational capabilities. This framework highlights the effect of information in the external environment in stimulating firms to deploy their technology and marketing capabilities to influence the level and speed of relevant product development activities. Using a longitudinal quasiexperiment to isolate the effects of external information on the relationship between firm capabilities and product development outcomes, the authors obtain results that are consistent with this framework. The authors therefore conclude that the most valuable characteristic of firm capabilities may be their ability to serve as flexible strategic options. In this role, firms can deploy them in ways consistent with environmental forces.
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