Unravelling firm performance in evolving markets: a capabilities approach to China's automotive sector

This study investigates how operational and dynamic capabilities have influenced the adaptation and performance of Chinese automakers in response to industry shifts toward electrification and intelligentisation from the mid-2010s onward. Focusing on XPeng Motors, Jeep China, and BYD, the research examines how varying operational capabilities levels, categorised as baseline, standard, and VRIN (Valuable, Rare, Inimitable, Non-substitutable) resources, interact with dynamic capabilities to shape strategic responses in a rapidly evolving market. Using a mixed-methods approach that includes secondary data analysis, participatory observation, and expert interviews, this study highlights the significance of aligning operational and dynamic capabilities to achieve sustained competitive advantages. Findings reveal that robust operational capabilities amplify the effectiveness of dynamic capabilities, allowing firms like BYD to adapt and thrive in volatile environments, while firms with weaker foundations, like XPeng, struggle to scale and sustain. The research contributes to strategic management literature by clarifying resource-capability alignment and offering insights for firms navigating disruptive industry changes.