This paper models the sustainability of firm abnormal profitability and uses the effectiveness of corporate management capabilities as a test to examine its impact on the sustainability of firm abnormal profitability. The role of industry competition as a moderator between the effectiveness of corporate management capabilities and the sustainability of firm abnormal profitability is also examined. Consistent with the resource-based view of the firm, we found that the effectiveness of corporate management capabilities positively influence the sustainability of firm abnormal profitability. This implies that corporate management capabilities are important contributors to the entire bundle of firm-specific resources and capabilities which enable some firms to generate competitive advantages that are sustainable. The effectiveness of corporate management capabilities has a larger influence on the sustainability of firm abnormal profitability for firms in lowly competitive or monopolistic industries than firms in highly competitive industries. The findings support the notion that not only do firm capabilities yield sustainable competitive advantages and abnormal profitability, but also industry competition reinforces the impact of firm capabilities in yielding sustainable abnormal profitability.
