Abstract. This theoretical review explores the relationship between marketing capabilities and firm performance in the context of the Resource-Based View (RBV) framework. The RBV emphasizes the significance of internal factors within a firm, asserting that competitive advantage arises from unique resources and capabilities. Marketing capabilities refer to an organization's ability to effectively and efficiently perform marketing activities, delivering value to customers and gaining a competitive advantage. The study examines various dimensions of marketing capabilities, including inside-in, spanning, and outside-in processes, which enable firms to understand customer needs, develop and execute marketing strategies, and build and maintain customer relationships. The review of existing literature demonstrates a strong positive relationship between marketing capabilities and firm performance, with studies revealing their impact on financial outcomes, market positioning, innovation, competitive advantage, and overall business success. The paper concludes with identifying several gaps in the existing research and offering opportunities for future investigation. 

Recent decades have witnessed a significant change in the process of global rivalry characterized by increased level of technological turbulence and complexity of the competitive environment. In such circumstances in order to survive, business organization must satisfy simultaneously efficiency, flexibility and adaptability requirements. The clear understanding of the reasons of the success of some firms in doing so and the failure of others in this respect represents a special interest for scholars as well as for business practitioners.

Theoretical Background: The Resource-Based View. The resource-based view (RBV) provides a good theoretical ground for the understanding of the existing differences in market performance across businesses (Wernefelt,1984; Conner, 1991; Barney,1991; Hunt and Madhavaram, 2020). Unlike the traditional market-based approaches that focus on external factors such as industry structure and market conditions (Bain, 1951; Porter, 1980, 1981, 1985), the RBV emphasizes the internal factors of the firm, asserting that the key drivers of competitive advantage lie within the firm's unique resources and capabilities. To say distinctly, in this theoretical paradigm the capability concept is used in explanation of the differences in performance among firms in the same industry. Resource-based theorists consider firm’s capabilities as complex bundles of skills and knowledge, used through organizational processes that provide effective and efficient performance of the firm and enables its assets to be deployed advantageously (Dierkx and Cool, 1989). For instance, Wernerfelt (1984), in his classical article, laid the foundation for the RBV by arguing that the source of a firm's competitive advantage lies in its unique and idiosyncratic resources. The author suggested that firms can achieve sustainable competitive advantage by acquiring and developing resources that are valuable, rare, and difficult to imitate. Similarly, Barney (1991) identifies four criteria for resources to contribute to sustained competitive advantage: rarity, value, inimitability, and non-substitutability. He proposes that firms with resources meeting these criteria are more likely to achieve superior performance.

Further, Prahalad and Hamel (1990) in their influential article introduce the concept of core competencies and argue that firms should focus on developing and leveraging their unique capabilities to gain a competitive advantage. The paper emphasizes that core competencies, which are a combination of resources and capabilities, drive the firm's strategy and differentiation. Conner and Prahalad (1996) focus on the concept of organizational rent, which refers to the excess returns that a firm can earn due to its unique resources and capabilities. The paper highlights the role of strategic assets, which are resources that enable the firm to differentiate itself and earn above-normal profits. According to Amit & Schoemaker (1993), capabilities are not isolated entities but are integrated and interconnected. The authors argue that complementarity among capabilities arises when different capabilities work together synergistically to create and deliver value. The ability to integrate capabilities effectively allows firms to leverage their resource base for competitive advantage. Teece, Pisano, and Shuen (1997) introduce the concept of dynamic capabilities within the RBV framework. The paper emphasizes the importance of a firm's ability to adapt, integrate, and reconfigure its resources and capabilities in response to changing environments. The authors state that dynamic capabilities enable firms to seize new opportunities, innovate, and sustain their competitive advantage.

To summarize the above discussion, the capabilities within the RBV theoretical framework, are considered as a key driver of resource-based advantage. They enable firms to transform their resources into valuable outputs, competitive positioning, and superior performance. Capabilities, when combined with valuable and rare resources, contribute to sustained competitive advantage.

The Marketing Capabilities Concept. In this study, the special interest represents marketing capability and its contribution to the company’s overall performance. Hunt and Morgan (1995) examining the new comparative advantage theory of competition, conclude that a market orientation provide a sustainable comparative advantage for a firm. This, in turn, according to the authors, can ensure for a truly market-oriented company, a position of a sustainable competitive advantage and superior long-run financial performance. George Day (1994), in his seminal paper, emphasizes the importance of marketing capabilities in driving organizational success. According to Day, marketing capabilities refer to an organization's unique and superior skills, knowledge, processes, and resources that enable it to deliver value to customers and gain a competitive advantage in the market. The author classifies marketing capabilities into three categories: inside-in processes, spanning processes, outside-in processes. He argues that “…the most distinctive features of market-driven organizations are their mastery of the market sensing and customer linking capabilities” (Day, 1994, p.37).  In his paper, Day suggests that to enhance their marketing capabilities companies need a comprehensive change program, which must include: (1) the diagnosis of current capabilities, (2) anticipation of future needs for ca-pabilities, (3) bottom-up redesign of underlying processes, (4) top-down direction and commitment, (5) creative use of information technology, and (6) continuous monitoring of progress. Similarly, Morgan et al. (2009) define marketing capabilities as organization's ability to perform marketing activities effectively, including skills, knowledge, processes, and resources that enable the development and execution of marketing strategies. The findings of the study show that market orientation and marketing capabilities are complementary assets that contribute to superior firm performance. 

In his later paper, Day (2011), highlights the necessity of “…closing the widening gap between the accelerating complexity of their markets and the limited ability of their organizations to respond demands new thinking about marketing capabilities” (Day, 2011, p. 183).  In this respect, he emphasizes the role of the following three adaptive capabilities: (1) vigilant market learning; (2) adaptive market experimentation; and (3) open marketing. Over the past two decades, the digitalization process created new challenges for firms in terms of marketing capabilities gap. Regarding this issue, Herhausen et al. (2020) based on an online survey, proposed a bulk of current and future digital marketing capability needs of industrial firms. The paper identifies the following two marketing capabilities gaps: the practice gap—the discrepancy between managers' ‘current’ practices and their ‘ideal’ digital marketing capabilities; and the knowledge gap—which demonstrates a significant divide between the digital marketing transformations in industrial firms and the extant scholarly knowledge that underpins this. An interesting investigation in this respect, represents Manis and Madhavaram (2023) recent study, which aims to show how marketing capabilities can be enabled by technology. In particular, the authors identified four operations and developed associated propositions to show how artificial intelligence (AI) technology can enable marketing capabilities. The study reveals a big potential of AI technology for enabling marketing capabilities and contributes to further developing some underexplored capabilities in the marketing literature, such as online personalization capability.

To summarize, the above academic literature defines narketing capability as a concept that refers to an organization's ability to effectively and efficiently perform marketing activities to achieve its marketing objectives and deliver superior value to customers. It encompasses a combination of knowledge, skills, processes, and resources that enable the organization to understand customer needs, develop and execute marketing strategies, and build and maintain customer relationships. A bulk of empirical studies highlight a strong relationship between marketing capabilities and firm’s performance.

Marketing Capabilities and Firm’s Performance. The exploration of the link between marketing capabilities and firm’s performance in the existing academic literature has several facets. Moorman and Day (2016) review the role of four elements of marketing organization, such as capabilities, configuration (including structure, metrics, and incentives), culture, and the human capital and indicate that these four elements are mobilized through seven marketing activities (7As) that occur during the marketing strategy process. According to the authors, these activities enable the firm to anticipate market changes, adapt the strategy to stay ahead of competition, align the organization to the strategy and market, activate effective implementation, ensure accountability for results, attract resources, and manage marketing assets. The authors conclude that marketing organization’s contribution to the overall performance of a company depends on the ability of the company to manage these seven activities throughout the marketing strategy process. Lagat and Frankwick (2017), based on RBV perspective and dynamic capabilities theories, study the relationships among marketing capabilities, marketing strategy, and marketing implementation. The results of the study indicate that marketing strategy implementation effectiveness positively moderates the effect of marketing capability on small firm market performance and financial performance. Davcik et al. (2021) explore the role of international R&D activities in the impact of SMEs’ technological and marketing capabilities on their performance. Based on the results of qualitative in-depth interviews with five Italian SME’s, the authors propose that marketing intelligence and marketing capabilities of SMEs positively affect their R&D performance. The findings of the study show that SMEs’ technological and marketing capabilities have dominant and positive effects on their performance in the international markets.

The meta-analysis of the link between marketing capabilities and firm’s performance (Kamboj and Rahman, 2015) shows that most of the studies in this area, measured marketing capability using the traditional marketing mix elements (pricing, product, promotion, and place) and revealed a positive and significant relation with firm performance. In other studies, according to Kamboj and Rahman (2015), marketing capabilities were measured as planning and implementation capabilities. These studies also mostly reveal positive and significant relation to performance. Cortez and Hidalgo (2022) examine marketing capabilities in business-to-business (B2B) settings across developed and emerging economies from a firm performance view. Based on the results of the cross-national study, the authors conclude that three capabilities are universal to marketing practice across economies with different level of development. In this study, the following marketing capabilities are found to be the key driver of SBU customer satisfaction: (1) segmentation and targeting capability as the baseline for cultivating a higher-order marketing capability; (2) pricing capability as the main driver of SBU profitability; and (3) new offering development capability.

Guo et al. (2018) distinguish three types of marketing capabilities - static, dynamic, and adaptive – the relative and explore contribution of each capability type to firm performance under different market conditions. The findings indicate that adaptive marketing capabilities exert the most significant influence on market performance. Interestingly, when faced with environmental turbulence, static marketing capabilities lose their positive effect and turn negative. On the other hand, this turbulence enhances the connection between adaptive marketing capabilities and firm performance. Moreover, dynamic marketing capabilities display a consistent impact, unaffected by the level of environmental turbulence. Generally, these research insights emphasize the critical need to distinguish between the three types of marketing capabilities and construct a diversified portfolio of capabilities tailored to the specific conditions of both the firm and the market. Xu et al. (2018), using survey data from firms in China, explore the mechanisms of building strong dynamic marketing capabilities (DMCs) from the perspective of both external (inter-organizational relationships) and internal (entrepreneurial orientation) factors. The results of the study indicate that that both vertical and horizontal relationship can facilitate the development of DMCs. However the authors suggest that the impact of vertical relationship is stronger than that of horizontal relationships for domestic firms but weaker for foreign firms, because foreign and domestic firms have different levels of resource dependence on their partners.

Several studies focus on mediating/moderating effects of marketing capabilities. For instance, Cacciolatti and Lee (2016), based on the representative sample of UK firms, examine the moderation effects of such factors as market orientation, marketing strategy and organisational power on the marketing capabilities–performance relationship. The authors define the following dimensions of marketing capabilities: accountability of the marketing department; the customer connection role; the perceived creativity of the marketing department; the level of interdepartmental collaboration with respect to the sales, operations, finance, and R&D departments. The results of the study indicate that amongst marketing capabilities accountability, creativity, and collaboration show a direct effect on company’s performance. Also, the study reveals the moderating effects of market orientation, marketing strategy and organizational power on the marketing capabilities–performance relationship. Kamboj et al. (2015), based on RBV theoretical framework, explore the relationships among marketing capabilities and financial performance of the firm. The results of the study show that a company possessing strong marketing capabilities outperforms those that solely prioritize operational capabilities in terms of financial performance. The findings demonstrate that competitive advantage serves as a mediator between marketing capabilities and financial performance. Cataltepe et al. (2023), using empirical data from the automotive industry in an emerging market, investigate the links of dynamic capabilities and marketing capabilities to firm performance. The findings of the study reveal a positive relationship between marketing capabilities and company’s performance as well as indicate on the mediating role of marketing capabilities on the relationship between dynamic capabilities and firm performance.

In the era of digital transformation, the link between digital marketing capabilities and company’s performance deserves a special attention from academicians. Jung and Shegai (2023), using KOSPI and KOSDAQ data, examine the impact of digital marketing innovation on firm performance. The study also explores whether marketing capability acts as a mediator between digital marketing innovation and firm performance and explores if firm size moderates this mediation effect. The results of the study demonstrate that digital marketing innovation has both direct and indirect effects on firm performance through marketing capability, with the indirect effects being more substantial than the direct effects. Tolstoy et al. (2022) based on the RBV perspective and market orientation literature, explore the reasons for performance variations among international e-commerce SMEs. The results of the study reveal that online marketing capabilities are necessary but not sufficient to increase performance among these companies. The authors suggest that marketing ambidexterity, reflected by both market-driven and market-driving approaches, is instrumental to leverage the effect of online marketing capabilities. Homburg and Wielgos (2022), using a mixed-methods approach with interviews and a dataset from multiple industries, examine the interaction effect of digital and classic marketing capabilities. The findings indicate that digital marketing capabilities significantly contribute to firm profitability independently of classic marketing capabilities. The study also investigates how organizational and environmental factors influence the interaction between these two types of marketing capabilities. This examination reveals important tradeoffs, leading to actionable managerial insights for leveraging the complementary potential of digital marketing capabilities and classic marketing capabilities while avoiding substitution effects.

Generally, the articles discussed above consistently demonstrate a positive association between marketing capabilities, both classic and digital, and firm performance. Strong marketing capabilities are found to enhance financial outcomes, market positioning, innovation, competitive advantage, and overall business success. Developing and leveraging effective marketing capabilities is crucial for organizations seeking to achieve and sustain high levels of performance in dynamic and competitive markets. However, the specific impact may vary based on industry, context, and the nature of the marketing capabilities employed.

Final Remarks: Existing Gaps and Directions for Future Research. While existing studies have provided valuable insights into the relationship between marketing capabilities and firm performance, there are still several gaps that offer opportunities for future research. Below we discuss some key gaps and potential directions for future research on marketing capabilities.

First, many studies have established a positive association between marketing capabilities and firm performance. However, there is a need for more research that examines the causal relationships between specific marketing capabilities and firm performance outcomes. Understanding the mechanisms through which marketing capabilities directly impact financial and market performance would provide deeper insights into their effectiveness.

Second, most studies in this area have been cross-sectional, capturing a snapshot of the relationship between marketing capabilities and firm performance at a specific point in time. Future research could benefit from longitudinal studies that track the development and evolution of marketing capabilities over time and their impact on firm performance, offering a more dynamic perspective.

Third, the influence of contextual factors on the relationship between marketing capabilities and firm performance is an area that warrants further exploration. Factors such as industry characteristics, competitive dynamics, firm size, and market orientation may shape the effectiveness and impact of marketing capabilities. Future research could delve into understanding how these contextual factors interact with marketing capabilities and influence performance outcomes.

Fourth, while some studies have examined mediating factors like customer engagement or strategic flexibility, further research could explore additional mediating and moderating mechanisms that explain the relationship between marketing capabilities and firm performance. Investigating the role of variables such as innovation, organizational culture, technology adoption, or customer satisfaction could provide a more comprehensive understanding of the underlying mechanisms at play.

Fifth, with the increasing significance of digital marketing in today's business landscape, there is a need for more research on the specific dimensions and impact of digital marketing capabilities. Exploring the relationship between digital marketing capabilities and firm performance, investigating the role of specific digital marketing strategies and technologies, and understanding the challenges and opportunities of digital transformation would be fruitful avenues for future research.

Sixth, comparative studies that compare the influence of marketing capabilities across different industries, firm sizes, or geographical locations could offer valuable insights into the generalizability and applicability of marketing capabilities in various contexts. Understanding the differences and similarities in the impact of marketing capabilities across different organizational settings would contribute to more nuanced knowledge.

Seventh, future research could adopt a dynamic capabilities perspective to study how organizations develop, integrate, and reconfigure marketing capabilities in response to environmental changes. Examining the agility, adaptability, and learning capabilities of firms in building and deploying marketing capabilities would shed light on the strategic processes involved in achieving and sustaining a competitive advantage.

By addressing these gaps and pursuing these directions for future research, scholars can further enhance our understanding of marketing capabilities and their impact on firm performance, providing valuable insights for practitioners and contributing to the advancement of marketing knowledge. 

References

1. Amit, R., & Schoemaker, P. J. (1993). “Strategic assets and organizational rent.” Strategic Management Journal, 14(1), 33-46.
2. Bain, J. S. (1951) Relation of profit rate of industry concentration: American manufacturing, 1936-1940. Quarterly Journal of Economics, 65, pp.293-324.Porter, Michael (1980) Competitive strategy ( New York, N.Y: Free Press)
3. Barney, J. (1991), “Firm Resources and Sustained Competitive Advantage,” Journal of Management, 17 (1): 771-792.
4. Cacciolatti Luca,  and Soo Hee Lee, (2016). “Revisiting the relationship between marketing capabilities and firm performance: The moderating role of market orientation, marketing strategy and organisational power,” Journal of Business Research, Volume 69, Issue 12, 5597-5610, https://doi.org/10.1016/j.jbusres.2016.03.067.
5. Cataltepe, V., Kamasak, R., Bulutlar, F. and Palalar Alkan, D. (2023), "Dynamic and marketing capabilities as determinants of firm performance: evidence from automotive industry,",Journal of Asia Business Studies, Vol. 17 No. 3, 617-638.  https://doi.org/10.1108/JABS-11-2021-0475 
6. Conner, Kathleen R. (1991). "A Historical Comparison of Resource-Based Theory and Five Schools of Thought within Industrial Organization Economics: Do We Have a New Theory of the Firm?" Journal of Management, 17 (1), pp. 121-154.
7. Conner, Kathleen R. & C. K. Prahalad, (1996) “A Resource-Based Theory of the Firm: Knowledge Versus Opportunism.” Organization Science, 7(5):477-501. https://doi.org/10.1287/orsc.7.5.477 
8. Cortez, Roberto Mora and Pedro Hidalgo, (2022). “Prioritizing B2B marketing capabilities: Crossvergence in advanced and emerging economies,” Industrial Marketing Management, Volume 105, 422-438, https://doi.org/10.1016/j.indmarman.2022.07.002.
9. Davcik Nebojsa S., Silvio Cardinali, Piyush Sharma, Elena Cedrola (2021) “Exploring the role of international R&D activities in the impact of technological and marketing capabilities on SMEs’ performance,” Journal of Business Research 128, pp. 650–660
10. Day G. S. (1994), “The Capabilities of Market-Driven Organizations,”, Journal of Marketing (October): 37-52.
11. Day, G. S. (2011). “Closing the Marketing Capabilities Gap.” Journal of Marketing, 75(4), 183–195. https://doi.org/10.1509/jmkg.75.4.183
12. Dierickx, L. and Cool, K. (1989), “Asset Stock Accumulation and Sustainability of Competitive Advantage,” Management Science, 35 (12), pp.1504-1511.
13. Guo Huiling, Hangjun Xu, Chuanyi Tang, Yuping Liu-Thompkins, Zhaoyang Guo, Baobao Dong, (2018). “Comparing the impact of different marketing capabilities: Empirical evidence from B2B firms in China,” Journal of Business Research, Volume 93, 79-89, https://doi.org/10.1016/j.jbusres.2018.04.010.
14. Herhausen Dennis, Dario Miočević, Robert E. Morgan, Mirella H.P. Kleijnen, (2020). “The digital marketing capabilities gap,” Industrial Marketing Management, Volume 90, 276-290, https://doi.org/10.1016/j.indmarman.2020.07.022.
15. Homburg, C., Wielgos, D.M. (2022). “The value relevance of digital marketing capabilities to firm performance.” J. of the Acad. Mark. Sci. 50, 666–688. https://doi.org/10.1007/s11747-022-00858-7
16. Hunt, S. D., & Morgan, R. M. (1995). “The comparative advantage theory of competition.” Journal of Marketing, 59(2), 1–15.
17. Jung, S.-U.; Shegai, V. (2023). “The Impact of Digital Marketing Innovation on Firm Performance: Mediation by Marketing Capability and Moderation by Firm Size.” Sustainability, 15, 5711. https://doi.org/10.3390/su15075711
18. Kamboja Shampy,  Praveen Goyal, Zillur Rahman, ( 2015 ). “A resource-based view on marketing capability, operations capability and financial performance: An empirical examination of mediating role,” XVIII Annual International Conference of the Society of Operations Management (SOM-14), Procedia - Social and Behavioral Sciences, 189, 406 – 415.
19. Manis, K.T. and Sreedhar Madhavaram, (2023). “AI-Enabled marketing capabilities and the hierarchy of capabilities: Conceptualization, proposition development, and research avenues,” Journal of Business Research, Volume 157, 113485, https://doi.org/10.1016/j.jbusres.2022.113485.
20. Moorman, C., & Day, G. S. (2016). “Organizing for Marketing Excellence.” Journal of Marketing, 80(6), 6–35. https://doi.org/10.1509/jm.15.0423
21. Morgan, N., Vorhies, D., & Mason, C. (2009). “Market orientation, marketing capabilities, and firm performance.” Strategic Management Journal, 30(8), 909-920.
22. Porter, Michael (1981) The contributions of industrial organization to strategic management, Academy of Management Review, Vol.6, no. 4, pp.609-620.
23. Porter, Michael (1985) Competitive advantage ( New York, N.Y: Free Press
24. Prahalad, C. K  Hamel, Gary. (1990). “The Core Competencies of the Corporation.” Harvard Business Review, 68 (3): pp.79-91.
25. Shampy Kamboj and Zillur Rahman, (2015). "Marketing capabilities and firm performance: literature review and future research agenda," International Journal of Productivity and Performance Management, Vol. 64, Iss 8, http://dx.doi.org/10.1108/IJPPM-08-2014-0117
26. Shelby D. Hunt, Sreedhar Madhavaram, (2020) “Adaptive marketing capabilities, dynamic capabilities, and renewal competences: The “outside vs. inside” and “static vs. dynamic” controversies in strategy,” Industrial Marketing Management, Volume 89, 129-139, https://doi.org/10.1016/j.indmarman.2019.07.004.
27. Teece, D. J., Pisano, G., & Shuen, A. (1997). “Dynamic capabilities and strategic management.” Strategic Management Journal, 18(7), 509-533.
28. Tolstoy Daniel, Emilia Rovira Nordman, Uyen Vu (2022). “The indirect effect of online marketing capabilities on the international performance of e-commerce SMEs.” International Business Review, 31, 101946, https://doi.org/10.1016/j.ibusrev.2021.101946.
29. Wernerfelt, Birger (1984), "A Resource-Based View of the Firm." Strategic Management Journal, 5, pp.171-180.
30. Xu Hangjun, Huiling Guo, Jing Zhang, Anh Dang, (2018). “Facilitating dynamic marketing capabilities development for domestic and foreign firms in an emerging economy,” Journal of Business Research, Volume 86, 141-152, https://doi.org/10.1016/j.jbusres.2018.01.038.
31. Lagat Charles and Frankwick Gary L. (2017). “Marketing capability, marketing strategy implementation and performance in small firms.” Journal for Global Business Advancement, 10(3), 327-345. DOI:10.1504/JGBA.2017.10005516