Repsponding to Industry Consolidation in Fragmented Industries: The Role of Capabilities in Small Business Survival

Driven by the competitive pressures that accompany industry consolidation in fragmented industries, small business owners and managers are searching for new ways to gain and sustain competitive advantage. This paper reports the results of a study designed to examine which capabilities help small business managers react to the intensified competition that accompanies industry consolidation. Profiles of capability bundles used by managers in a fragmented industry undergoing industry consolidation, specifically the neighborhood drugstore, are developed and differences in performance among the drugstores are examined Our results suggest that developing capabilities is important to responding effectively to industry consolidation. Further, firms that focus on developing a broad range of capabilities significantly outperform those firms that develop only a narrow range of capabilities.