THEORETICAL ASPECTS OF INTERNAL AND EXTERNAL DETERMINANTS OF FIRM PERFORMANCE: INSIGHTS FROM DEVELOPING ECONOMIES

Abstract

The firm’s internal and external factors have been recognised as a source of revenue and a generator of long-term competitive advantage. Still, research on the effects of these factors on the firm's performance is an evolving area. In light of the existing financial theories, this study aims to analyse the relationship between internal and external factors of firm performance. By exploring determinants of firm performance in Pakistan and Turkey. This theoretical review suggests that firms operating in developing economies often face limited external resources, therefore by making the efficient use of internal resources, firms can overcome these constraints by enhancing human capital through innovation, technical proficiency, and specialised knowledge. Highly concentrated industries in these developing economies can hinder competition and innovation, so firms must adjust their strategies to navigate external market conditions. In Pakistan, firms can use market intelligence to cater to local consumer preferences and manage competitive challenges. In Turkey, firms can maximize regional and worldwide prospects by staying aware of market trends and regulatory modifications. Firms must adapt to national and international market changes, user preferences, and emerging trends to foster innovation and collaboration.