Which of the following is a true statement about capabilities?
A) Capabilities exist when resources have been purposely integrated to achieve a specific task or set of tasks.
B) Valuable capabilities are based almost entirely on tangible resources.
C) Capabilities based on human capital are more vulnerable to obsolescence than other intangible capabilities because of the tendency for employee knowledge to become outdated.
D) The link between firm financial performance and capabilities is dependent on whether the capabilities are based on tangible or intangible resources.

Question

Quizplus · Accepted Answer

Capabilities refer to the ability of a firm to effectively and efficiently perform a set of tasks, activities or processes. Capabilities are built by integrating resources, both tangible and intangible, in order to achieve a specific purpose. Therefore, option A is the correct statement.

Option B is incorrect as valuable capabilities are often based on intangible resources such as knowledge, relationships, and reputation.

Option C is partially correct. Capabilities based on human capital may become obsolete if employees' knowledge and skills become outdated, but other intangible capabilities such as relationships or brand reputation may not be vulnerable to obsolescence.

Option D is incorrect as the link between firm financial performance and capabilities is dependent on various factors such as the degree of rarity, imitability, and substitutability of the capabilities in question, irrespective of whether they are based on tangible or intangible resources.

Which of the Following Is a True Statement About Capabilities