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Resources are the source of a firm's capabilities which are the source of the firm's core competencies.

Resources are those tangible and intangible assets that are semi-permanently linked to the company, whereas capabilities are the means of carrying out various tasks based on the resources at hand (Grant, 1991; Wernerfelt, 1984). The cumulative knowledge and skills a company has are incorporated into its organizational procedures and practices to form its capabilities (Day 1994).

A person or thing has the ability to perform something, according to the definition of a capability. This is an instance of when someone has the capacity to cook when they are able to cook. The ability of a computer to open a file is demonstrated, for instance, when the computer can do so.

Any organization's "defining strength" is referred to as its core competency, which is comprised of its capabilities, knowledge, skills, and resources. A company's core strength is unique, making it difficult for other organizations—whether they are longtime rivals or recent market entrants—to imitate it.

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