Which statement defines a capability?

• A. A resource is a tangible asset; a capability is a market position.
• B. A resource is a skill; a capability is a physical asset.
• C. A resource is an asset; a capability is a skill or process that enables a resource to perform.
• D. Resources are intangible; capabilities are just ideas.

Answer: (C)

The main idea here is the distinction between resources and capabilities in how a firm creates value. A resource is an asset the firm owns—tangible like machinery or intangible like brand or patents. A capability is the organization’s ability to deploy and coordinate those resources to perform activities; it’s the skill or process that lets a resource actually do its job.

So the statement that a resource is an asset and a capability is a skill or process that enables a resource to perform captures this distinction precisely. It fits with the idea that capabilities come from routines and know-how that translate assets into actions, creating value and potential competitive advantage. For example, owning advanced manufacturing equipment is a resource, while the capability is the end-to-end process, routines, and collaboration that allow that equipment to produce high-quality products efficiently.

The other options mix up what resources and capabilities are—treating capabilities as market positions or physical assets, or implying resources are purely intangible or that capabilities are only ideas—whereas the correct view recognizes resources as assets and capabilities as the actionable, coordinating abilities that enable those assets to perform.