"Searching for a unknown land"...

.... I am searching for new paths to answer... For now, my thesis has been directing to concepts of path dependence, industrial competitive patterns and of the "evolutionary competitive dynamics"...

Book Evolutionary Competitive Dynamics / Dinâmica Competitiva Evo...

if the firm performance is more related to external factors, the firm simply is not strategic (enough)

In my opinion it depends on the strategy of organization and business condition, when an organization is active in more dynamic environment with a lot of changes the external factors become so important. however an organization which produces an exclusive product and has no rivals focusing on internal factors like more innovative human resource can be more important and vital.

Which categories of factors are most important?

of course, It depends on the mission of the organization, the structure and environment in which the organization is located, ...

But in general,

In order to achieve competitive advantage, an organization must pay attention to its external situation and consider the internal capabilities too.

In the path to creating a competitive advantage, there are two important points: First, this is the pathway of the sequence that leads to excellent performance and competitive ability of the organization. That is, if an organization can, through its merits, create a sustainable competitive advantage that is valuable to its customers and always superior to its competitors, it actually has a good performance and brought competitiveness.

Secondly, because of the increasing environmental complexity and intensity of competition, the competitive advantage is easily simulated by competitors or loses its importance to customers, so they must be replaced with new advantages. Accordingly, the organization must think of finding unique competitive advantages for itself.

Therefore, both internal and external factors are important and in fact inseparable. It's not possible to pay attention to one without considering another and it can lead to the destruction of the organization.

the firm has greater control over internal factors than external factors, and adapt internally - the internal - to the external.

Dear Leonidas A. Papakonstantinidis

Internal should be match to eksternal in order to formulate strategy..they need each others. They need them both variables....if your internal capacity is ok while external condition is not supporting...then the goal and target of companies might slipped. Therefore you need those variable to be fit in the specific time

A successful company uses its internal factors to meet the challenges of external factors(environment). Adaptability, up gradation of technology , implementing best practices can help meet the demands of external factors. Regular mapping of environment and taking quick actions could contribute to better performance of the firm.

In a study conducted in Uruguayan companies, we have been able to confirm what the literature on the subject generally affirms: that although external factors influence performance and business results, however, internal factors have an even greater impact.

In the attached file you will see a synthesis of the mentioned findings. It consists of a structural model for SMEs and another for large companies, in which it can be seen that, in the case of SMEs, financial results are explained 67% by internal factors (that is, what the company controls and manages) and in 74% in the case of large companies.

For more information, you can consult the book mentioned in the attachment, especially chapter 2.

Regards,

Álvaro.

Hi Sebastiao

The answer is both.

The paper below tackles this very interesting issue by looking at the global indicators of external environment (proxy being macro-economy) as well as indicators of internal managerial quality (proxy as entrepreneurial culture).

Of the two which is more significant? I would argue that the quality of the internal manageriual and entrepreneurial decision-making is more important. This internal quality will impact investment decisions, talent management, resource allocations, operational optimisation, marketing strategies etc etc. This also explains why two firms within the same country or industry or sector, will have significantly widely different outcomes and successes.

Preprint Optimising the pillars driving sustainable firm innovation; ...

Internal or external factors, which is more related to the firm performance?

The firm performance is related to the internal factor as well as to the external. You have to take a systemic approach and make sure that there is a fit between the internal and the external factors. If you want to approach the market you have to have the right capabilities. Finding external financial resources for investment means you have to convince investors/financiers that the company will have results because of its capabilities. The SWOT-analysis is based on the internal (strengths and weaknesses) and external (opportunities and threats) factors. You have to take them all into consideration and weigh them and see which one in which circumstance is more crucial than the other.

The main competitive advantage for firms nowadays is capacity, mostly stored in humans (human resource). According to Kroesen, Darson and Ndegwah (Capacities, development and responsible innovation, In: Responsible Innovation 2 by Bert-Jaap Koops e.a. 2015) capacity can be defined as a function of knowledge, culture and the enabling environment. In its July-August edition, Harvard Business Review writes on its cover that the main challenge for implementing Artificial Intelligence is not technology but culture, which is a main part of the capacity equation by Kroesen, Darson, Ndegwah.

Sebastiao, the question of what factors impact on firm performance has been a contested issue over the decades. Whilst some argue that organisational performance is solely dependent on how suitable internal factors of production such as job satisfaction and climate/culture are (e.g. Rodrigues, 2010; Shiu & Yu, 2010), other scholars ascertain that external factors are more important (see Ajayi, 2016). However, some academics believe that both factors should be given due significance (see Lings & Greeney, 2009). Therefore the performance issue is highly contested and debatable in Management and Organisational Studies.