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PurposeThe purpose of this paper is to examine the relationship between a number of variables pertaining to core capability, competitive strategy and performance of construction small to medium size enterprises (SMEs) in China.Design/methodology/approachThe paper consists of a quantitative survey. It involves mainly the development of instrument and testing of the hypotheses.FindingsCore capability and competitive strategy are found to influence construction SMEs' performance. Moreover, there are positive relationships between core capability and competitive strategy. This suggests a need to align core capability and competitive strategy as a precondition for superior performance.Research limitations/implicationsThe paper has limitations as a result of data collection. A somewhat larger sample would obviously permit firmer conclusions to be drawn from the results of the statistical analysis.Originality/valueThis paper will contribute to the literature on SMEs, strategic management and resource‐based theory. This integration of scope is particularly new to the context of the Chinese construction industry. Similarly, this research will have implications for practice. The research findings help SMEs' managers to understand the impact of the unique resources of their enterprises and competitive strategy.

As an important participant in the international construction market, Chinese construction firms (CCFs) are confronted with the tasks of keeping themselves competitive. To help CCFs maintain and improve their competitiveness, this research builds a conceptual model to investigate the relationship between competitive strategy, market entry mode and performance within CCFs. Based on data collected from CCFs, this research has confirmed the importance of cost leadership strategy, differentiation strategy and business scope diversification, to achieve their superior performance. Moreover, there are positive relationships among entry mode strategies with CCFs’ international performance.