A firm’s survival depends on its ability to create, access and utilize new resources, build on its capabilities platform, and make the capabilities more inimitable to achieve competitive advantage (Peteraf, 1993; Yu et al., 2014; Barrales-Molina et al., 2015; Yu and Ramanathan, 2016). The resource-based view (RBV) of the firm further suggests that heterogeneity in firm performance is due to ownership of resources that have differential productivity (Makadok, 2001; Phusavat et al., 2009). Although it has been argued that the productivity and efficiency gains from organisational capabilities such as operations are critical in ensuring that firms maintain their competitive advantage (Krasnikov and Jayachandran, 2008; Phusavat et al., 2009), our understanding of the association between operations capability, productivity, and performance is still very limited. There are still two important issues that have not been addressed in the literature. First, despite increasing research interest in productivity gains and the factors that lead to higher productivity, there has been comparatively little empirical study in this area, especially the mediating role of productivity in the relationship between capability and performance (Lieberman et al., 1990; Smith and Reece, 1999; Talluri et al., 2003). Productivity is a measure of “the efficiency with which physical inputs are converted to physical outputs” (Lieberman et al., 1990, p.1195). Productivity has been gradually introduced into efficiency analysis (Huang et al., 2016), and productivity analysis plays an important role in strategic planning and competitive analysis, which can provide a useful tool for improving the quality of operations and production management (Lieberman et al., 1990; Sudit, 1995). Several scholars have focused on the impact of productivity on business performance, especially in the service industry (e.g. Schefczyk, 1993; Smith and Reece, 1999; Tsikriktsis, 2007), but they investigated the impact of productivity on business performance without examining the potential role of organisational capabilities. Capabilities have been broadly defined as “complex bundles of skills and accumulated knowledge that enable firms to coordinate activities and make use of their assets” (Day, 1990, p.38). Operations capability is focused on performing organizational activities efficiently and flexibly, with the minimum wastage of resources (Krasnikov and Jayachandran, 2008). The role of superior operations capability as a source of competitive advantage has long been widely recognized (e.g. Skinner, 1969; White, 1996), and investigated in previous empirical studies (e.g. Nath et al., 2010; Terjesena et al., 2011; Yu et al., 2014; Chavez et al., 2017).