The Strategic Signaling of Capabilities by Service Firms in Different Information Asymmetry Environments

Abstract

This study investigates how firms in high or low information asymmetry environments obtain performance benefits from their capabilities. Using data obtained from a sample of 234 service firms, the results indicate that service firms in low information asymmetry environments obtain direct performance benefits from the mere possession of capabilities. In high information asymmetry environments, such as professional services, the performance benefits of capabilities only occur when firms use strategic positioning to signal the presence of their resources. Firms in high information asymmetry environments use the focus of their service offering as well as the degree of service customization to indicate the presence of underlying capabilities.