173 DEVELOPMENT AND VALIDATION OF RESOURCE BASED BUSINESS CAPABILITIES MEASUREMENT INSTRUMENT A. Zafer ACAR, Cemal ZEHİR Gebze Institute of Technology, TURKEY Abstract Resource base view (RBV) defines capabilities as collective skills, abilities, and expertise of a firm that plays strategically crucial role to acquire competitive advantage. These firm special capabilities are the main sources of superior performance and sustainable competitive advantage. Researchers that pursue RBV, many times tested the effects of business capabilities on superior performance and competitive advantage. But the findings have been diverse because of the lack of a valid and reliable measurement instrument. On this study, a valid measurement instrument has been conceptualized and developed among seven dimensions of business capabilities to fulfill this gap. Data collected from 379 owners and senior managers have been analyzed to test the validity and reliability using confirmatory factor analyzing. As a result, this study makes a contribution to the measurement stream of capabilities by providing a valid and reliable operational measurement instrument. Key words: Resource base view, Business capabilities, Confirmatory factor analyze, Measurement instrument, Introduction Intensive competitive environment is one of the most basic characteristics of the current economy as recognized by everyone. Now, new customer desire to have their needs in a quicker and cost-effective manner. Hence they should undergo a unique organization in order to complete in terms of quality and quantity in this new customer-oriented economic era. Firms should based on or invest on their capabilities consistently to reach an advantageous position on the rapidly changing competitive global market. But, invest on capabilities without a valid strategy has no capacity to reach that advantageous position and it can be called source extravagance. In literature, for selection of business strategies to create competitive advantage, there are two thinking schools, generally considered as contrary to each other, namely, which are strategically based on competitive position and resource based view. Positioning theory (Porter, 1980; 1985; 1996; 2001) deals with the operational environment as the starting point of the business strategy. For this reason, it is often called an inward-looking perspective. According to this thinking school, a business should have access to the possible strategic positions in the market and sought for the most efficient one among these strategic positions.