Abstract

Purpose: Based on the resource-based view and the competitive advantage theory, the study views marketing capabilities (product, pricing, delivery/inventory, and promotional support) as sources of competitive advantage (differentiation advantage and low-cost advantage) and examines their impacts on competitive advantage, which in turn, will influence non-business and business performance. Research design, data and methodology: Data were collected from 149 representatives of franchising companies in South Korea and analyzed with SmartPLS 3.3.7. Results: First, promotional support and product have a significant impact on differentiation advantage. Second, pricing and promotional support have a significant impact on low-cost advantage. Third, differentiation advantage has an influence on non-financial and financial business performance. Fourth, low-cost advantage has an impact on non-financial performance but has no significant direct impact on financial performance. Fifth, non-financial performance is related to financial performance. Finally, the result of IPMA shows that importance and performance values of exogeneous variables are different depending on firm size. Conclusions: The findings suggest that franchisors should focus on different marketing capabilities depending on their strategic focus and objectives. Finally, the findings based on an IPMA suggest that small companies perceive low-cost advantage as important, while their counterparts do not. Several theoretical and managerial implications are offered.