Impact of Internal Capabilities on Firms’ Financial Performance: With Special Reference to Large Export Manufacturing Firms in Sri Lanka

This study explores the influence of internal capabilities on the financial performance (FP) of large export manufacturing firms in Sri Lanka. Grounded in the Resource-Based View (RBV) and Core Competency Theory, the conceptual model focuses on Leadership Capability (LS), Business Strategy (BS), Shared Value (SV), and staff Competence (STF). Adopting a positivist stance and deductive approach, a pilot survey of 39 responses was conducted to test content validity. Subsequently, structured questionnaires were distributed to 453 large-scale exporters listed by the Export Development Board (EDB), yielding 385 usable responses. Structural Equation Modeling was used for analysis. Findings reveal that LS, BS, and STF significantly influence (FP). However, SV did not show a statistically significant impact and was removed from the final model. This research provides empirical insights into which internal capabilities most effectively drive financial outcomes in Sri Lanka’s export-oriented manufacturing sector.