Compositional Offering

According to Hill (1988), an offering can be viewed as a bundle of features that differ in quality and quantity. Customers increasingly demand value, features, functionalities, and convenience from the firms. The compositional offering can be a solution to the demands of the customers to develop an integrated solution and extended offerings. Firms are trying to develop integrated solutions by integrating features of products or products and services that satisfy the particular demands of customers' needs. For instance, appliance manufacturing firms simultaneously offer the facility of delivery, installation, and after-sale service (Bressler, 2012). This composition is not an aggregation of different features, and instead, it is reconfiguration and re-composition to facilitate cross-functionality. Firms pursuing composition-based strategies are experts in developing innovative, low-cost designs that offer their customers more value, speed, convenience, and quality (Luo et al., 2015). As a result of this integration of features of existing resources and products and services, customer satisfaction is enhanced.

Compositional Competition

Due to the small scale and scope of operation, small firms cannot follow a cost leadership strategy. Therefore, they cannot compete only on cost with large firms (Bressler, 2012). Similarly, pursuing a differentiation strategy requires investment in Research and Development (R&D) and a firm brand name. However, it is not the case for small firms. Besides, pure cost-leadership or differentiation strategy does not always lead to superior competitive advantage (Ma, 2000). Even if such an advantage is obtained, it is difficult to sustain for small firms (Warnaby & Woodruffe, 1995) because of ease of imitation, resource mobility, and resource homogeneity. Therefore, small firms cannot rely on a single source of competitive advantage.

Consequently, they try to combine different sources of competitive advantage to strengthen their competitive position relative to their competitors. The compositional competition focuses on offering low costs with increased product features or better alternatives to their target customer (Luo et al., 2015). They may simultaneously pursue cost innovation that offers lower than excepted cost or value innovation that develops new functionalities and features. (Cai, Ying, Liu, & Wu, 2019). The composition-based view emphasizes the competitive advantage a firm can attain from the ordinary resources by rearranging them in a new way by ensuring speed of delivery, quality, flexibility, and quick response to the market.

Compositional Capability

Small firms can achieve tremendous growth by identifying and integrating ordinary resources. These ordinary resources are neither distinctive nor rare and can be easily obtained from the factor market, and these generic resources have no intrinsic value. However, the compositional capability enables a firm to integrate these shared resources and leverage maximum from them creatively. Compositional capability is the ability of a firm to identify and combine disparate resources, including internal and external ones (Luo et al., 2015). However, this composition is not a mere accumulation of resources. Instead, it is a skillful, creative, and harmonious arrangement of various resources, features, or even sources of competitive advantage to create an interdependent whole (Luo et al., 2018).

Small firms can overcome resource disadvantages by identifying and skillfully combining ordinary resources to adapt to market requirements (Luo et al., 2015). This is achieved through improvisation, imitation, and compositional capability. This makes compositional capability theoretically closer to dynamic capabilities (Tehseen et al., 2018; Volberda et al., 2015) since both stress the need to identify, integrate, and reconfigure internal and external resources to improve the chances of survival (Luo et al., 2018). Using the dynamic properties of compositional capability firm can quickly move from one competitive position to another. Thus, compositional capability provides a means for adaptability in a turbulent environment.

Compositional offering and firm performance

According to Li (2016), the compositional advantage is the attractiveness of the compositional offering. The compositional offerings may work in different ways. For example, a few compositional offerings are aimed at low cost or increased value, whereas a few may lead to the extended offering, total solution, and one-stop convenience (Luo et al., 2015). These are likely to result in a better firm performance in each situation. Due to their compositional capability, small firms can integrate disparate resources in new ways. The firm may combine different products, features of products or products and services to develop a holistic solution that offers higher value for its customers. Due to their popularity among the customers, such holistic solutions lead to better performance than simple product development (Matthyssens & Vandenbempt, 2008; Oliva & Kallenberg, 2003; Penttinen & Palmer, 2007). Small firms may employ their composition-based strategy to extend the range of product offerings. This allows small firms to reach and attract a more comprehensive market segment because it gives customers the liberty to choose the most suitable option according to their preferences. This improves the customer's satisfaction level and results in steady sales growth. Fulfilling the customers' demands boosts the firm's performance (Cai et al., 2019). Hence, small firms achieve a compositional advantage by creatively combining available resources to offer their customers increased convenience, speed, quality, efficiency, and a higher price-to-value ratio (Luo et al., 2015).

H1: Compositional offering is positively related to a firm performance.

Compositional competition and firm performance

Prominent scholars (Mintzberg, 1988; Stalk, Evans, & Shulman, 1992) propose that the firm contest with their customers on several factors, including quality, design, support, image, price, speed, consistency, acuity, agility, and innovativeness. Small firms may reconfigure and recombine these different sources of competitive advantage to develop their competitive position. This helps small firms to differentiate from their competitors and reduces the risk of intimation (Banker, Mashruwala, & Tripathy, 2014). Small firms may integrate cost-reduction and differentiation strategies to survive and thrive (Li, 2016) and propose more value for the mass market (Peng et al., 2018). Small firms can attract more customers, especially in low-income markets, by offering a low-cost alternative to their customers. By pursuing a low-cost production approach, they can obtain a higher profit margin by selling the same number of units of the same product. Also, if their product offering is superior to their competitors, firms can generate more revenues even by selling the same number of units. Therefore, composition competition becomes a source of better financial performance and sales growth (Becerra, Santaló, & Silva, 2013).

H2: Compositional Competition is positively related to a firm performance.

Compositional capability and firm performance

Resources themselves have no value attached to them. Merely owing valuable and unique resources is not enough. According to the resource-based view, ordinary resources can lead to competitive parity (Luo et al., 2018). However, compositional capability enables small firms to deploy these generic resources and leverage their latent value. The ability to bundle and integrate disparate resources better than the competitors can become a source of competitive advantage leading to improved performance (Rui, Zhang, & Shipman, 2017). In addition, firms can achieve a compositional advantage through improvisation (Luo et al., 2015; Volberda et al., 2015). This entails understanding the need of the customers and then offering the best possible solution with the available set of resources. This leads to enhance sales growth.

H3: Compositional Capability is positively related to a firm's performance.

Network competence and firm performance

Market intelligence plays a critical role in pursuing a composition-based strategy. Therefore, network competency is a potential source for achieving superior performance compared to rivals (Tehseen & Sajilan, 2016). Network competency is a firm's capability to build and maintain long-term relationships with customers, suppliers, regulatory bodies, etc. (Ritter, Wilkinson, & Johnston, 2002; Tehseen et al., 2018). Firms that maintain close relationships with other stakeholders enjoy higher economic performance in the long run (Banker et al., 2014). This enhances the satisfaction level of both customers and suppliers. The ability to share resources in a network reduces risk and cost. It also results in the growth of business and higher organizational performance (Kurniawan & Christiananta, 2016). Hence, trust and collaboration enhance the performance of small firms (Cannas, 2021). The inability of small firms to develop a working relationship with other stakeholders may negatively influence their firm performance (Tehseen et al., 2018). Lack of network is considered a significant reason for the failure of small and medium enterprises (Franco & Haase, 2010). For instance, the research work ofCampbell et al. (2017) demonstrates that in-group ties and strong network relationships positively influence small business performance.

H4: Network competency is positively related to a firm performance.

Network competence between compositional offering and a firm performance

For the development of compositional offerings, access to different resources is required. The open innovation paradigm stresses that firms cannot operate in isolation. As a result, firms enter into strategic alliances and become part of networks. But, to truly benefit from these networks, network competency is required. Supply uncertainty poses a potential threat to the efficiency of retailers. In this situation, sourcing from multiple suppliers may be beneficial in reducing the interruption in supply and improving the firm's flexibility (Chen & Guo, 2014). SMEs must rely on network competencies to obtain necessary assets and resources from external actors (Tehseen et al., 2016). Usually, small businesses lack strong R&D or brand reputations. However, their central position in the network allows them to benefit from the supply chain and the technical support from their partners. Marketing intelligence is required to recognize the availability of the desired resource in the factor market. Developing a relationship with the possessors of such resources becomes paramount for developing the compositional offering. This enables them to develop a holistic solution that meets their customers' requirements. Therefore, if the relationship with other members helps a firm develop a unique offering, it will lead to differentiated organizational performance. A competitive advantage over the competitors can be obtained (Nyaga & Whipple, 2011).

H5: The relation between compositional offering and firm's performance is moderated by the network competence of small firms in such a way that a higher level of network competence will increase a firm's performance compared to a lower level of network competence.

Network competence between compositional competition and firm performance.

The first part of the composition-based strategy entails identifying the critical resources. In contrast, the second part of implementation focuses on obtaining these resources through network-based relationships and leveraging them to take advantage of the available market opportunity (Luo et al., 2015). Network competence becomes an essential resource for small businesses because a close working relationship with external stakeholders helps SMEs minimize uncertainty, enhance resource levels, and increase their profit margin (Elmaraghy et al., 2013; Tehseen et al., 2018). Such a strong relationship with customers and suppliers helps small firms differentiate their offerings from others, which cannot be duplicated easily. Therefore, the performance of small firms is usually "a function of know-how and know-who" (Hill & Mcgowan,1996, p. 148). Due to intense competition, firms rely on networks to extract unique resources from suppliers and increase their profit margin (Elmaraghy et al., 2013). Network competence besto ws the ability to pull the requisite resources (Luo et al., 2015). Developing strong ties with the various sources of resources is essential as value creation is contingent upon the firm's ability to maintain a long-term relationship with other actors.

H6: Relation between the cost side of compositional competition and the firm's performance is moderated by the network competence of the small firm.

Network competence between compositional capability and firm performance.

However, to exploit the market opportunities or obtain a competitive advantage from network competence, the firm must have the ability to integrate both the internal and external resources into a superior product offering to customers. Network reinforces small firms ability to develop holistic solutions and integrated offerings to the customers or engage in a compositional competition. Firms may use their network to get a better offer from their suppliers. Therefore it is proposed that the impact of composition-based strategy on organizational performance is likely to enhance in the presence of solid network competence. On the contrary, a low level of network competence weakens the relationship between composition-based strategy and a firm's performance.

H7: The relation between compositional capability and a firm performance is moderated by the network competence of small firms such that a higher level of network competence will increase firm performance attributable to compositional capability.

Data Collection

For this paper, the authors have adopted positivist ontology. Moreover, a deductive research approach was assumed as well. The chosen unit of analysis was retail stores. Consistent with the policy adopted by previous researchers (Kiyabo & Isaga, 2020; Tehseen, Ahmed, Qureshi, Uddin, & Ramayah, 2019; Yasa, Giantari, Setini, & Rahmayanti, 2020) data was collected from owners/managers of these stores. For a better response rate (Falahat et al., 2018), a structured questionnaire using a survey method was employed to collect data. AsAnwar (2018) andOng, Ismail, and Yeap (2018) recommended, a self-reported questionnaire was developed because it is hard to get accurate financial data about small firms.

Context of the study

Since the composition-based view focuses on small and medium enterprises of emerging economies, this study was conducted in small retail stores in Lahore, Pakistan. As approximately half of SMEs in Pakistan is related to retail and wholesale sectors (Dar, Ahmed, & A, 2017), retail stores provide an exciting setting for this study. Due to the hyper competitive environment of retail industries, any competitive advantage is short-lived. Also, in a high-velocity environment of the retail sector, competition, market pressure, and customer attitude make competitive advantage temporary (Liu & Yu, 2021). Accordingly, retail firms are forced to find new sources to augment their competitiveness. Due to their size constraints, small retail stores are more affected by environmental complexities (Borchardt et al., 2020; Clampit, Lorenz, Gamble, & Lee, 2021). Also, small retail stores can compete with larger rivals through a unique combination of different sources of competitive advantage. This improves the survival and growth prospect of such retail firms.

Variables and Measures

• Independent Variables: The One-stop shopping convenience scale developed byBerry, Seiders, and Grewal (2002) andLiu and Wu (2007) was employed to measure compositional offering. The scale for the compositional competition was adopted from the study conducted by Luo et al. (2018). This scale is further divided into both cost-side competition and value-side competition. Later on, the geometric mean of these two subscales was calculated to represent the compositional competition. As Volberda et al. (2015) consider compositional capabilities as a sub-set of dynamic capability, the compositional capability was measured by adapting the scale of dynamic capabilities developed by Kump, Engelmann, Kessler, and Schweiger (2019). All these items were measured on a five-point Likert-type scale ranging from strongly disagree to strongly agree.

• Moderator: Based on the study of (Tehseen et al., 2019), a six-item scale was used for Network Competence, initially developed by Ritter et al. (2002). A five-point Likert-type scale was used with "1" representing (strongly disagree) and "5" (strongly agree).

• Dependent Variable: A better firm performance indicates a firm's growth. Previous research work such as Jiang, Liu, Fey, and Jiang (2018) andAbu-Rumman, Shraah, Al-Madi, and Alfalah (2021) have relied on financial performance measures while studying the effect of networks on the firm's performance. Therefore, four items scale fromChandler and Hanks (1993) andAhmad, Wilson, and Kummerow (2011) was used to measure the perceived satisfaction of respondents with the financial performance of their businesses. These items were measured on an a 5-point Likert-type scale with "1" representing "Not at all Satisfied" and "5" denoting "Very Satisfied". Subjective performance measures were used because they provide a holistic understanding of performance compared to a single one (Hernández-Linares, Kellermanns, & López-Fernández, 2021).

Confirmatory Factor Analysis

Different means were employed to check the Goodness of Fit. The first-order model of the latent variables had a Chi-Square value of 215.040 at p<0.05. Furthermore, CFI, RMSEA, and SRMR had 0.961, 0.042, and 0.054, respectively. This provides evidence of the good Goodness of Fit (Hair, 2010; Hu & Bentler, 1999).

Robustness Check

Two additional tests were carried out to confirm the robustness of the findings for the seventh hypothesis. Only compositional capability, network competency, and firm performance were considered for simplicity. As the first mean of robustness check, the conditional effect of network competency on the relation between compositional capability and a firm's performance was calculated through Process Macro in SPSS (Hayes & Scharkow, 2013). As evident from Table 6 the conditional effect of moderating variable is gradually increasing as we move from lower value to higher value. This supports the strength of the relationship between compositional capability and a firm's performance increases at a higher level of network competency. In addition, the effect size is significant at all three values.

Similar findings are obtained from the slope test. As we move from the lower to the higher value of the moderating variable, i.e. network competency, the slope becomes steeper. In other words, the slope of the regression equation at the lower value of network competency is less steep than the slopes at medium and higher values. This confirms the positive moderating effect of network competency on the relationship between compositional capability and a firm's performance. The summary of the findings is in Table 7.