How Competitive Advantage Mediates the Relationship Between Organizational Capability and Employee Performance in Startups

Abstract

This paper examines how organizational capability influences employee performance in startups and whether this relationship is mediated by competitive advantage. The topic is important because startups operate under high uncertainty and resource constraints, requiring internal capabilities to be transformed into sustainable performance outcomes. Many startups experience uneven capability development and fluctuating employee performance; therefore, this study asks whether competitive advantage mediates the relationship between organizational capability and employee performance. This study is novel by positioning competitive advantage as an internal performance-enabling mechanism, focusing on employee-level performance, and providing evidence from a regional Indonesian startup ecosystem (Sumatera Utara). A quantitative cross-sectional survey of 150 startup employees was analyzed using PLS-SEM with 5,000 bootstrap resamples. Organizational capability positively affects competitive advantage and employee performance, with competitive advantage acting as a significant mediator. Startups must transform organizational capabilities into competitive advantage to enhance employee performance, emphasizing learning systems, adaptive leadership, and strategic HR practices