Purpose-The purpose of this paper is to examine the effects of organisational capabilities on the success of Eritrean wood-and metal-manufacturing firms. Specifically, the paper analyses the effects of owner-managers' innovativeness, personal relations and employees' technical skills on the firms' success. Design/methodology/approach-The study entailed a survey of 287 wood-and metal-manufacturing small and medium enterprises, which were selected using stratified random sampling. Structural equation modelling was used to analyse the data and generate the findings presented in this paper. Findings-The findings indicate that owner-managers' innovativeness and personal relations have a significant influence on the firms' success. However, although employees' technical skills relate positively to the firms' success, the relationship is statistically insignificant largely because of the limited participation of workers in designing and developing the products. Practical implications-The paper can enlighten owner-managers about the value of innovativeness and relational capabilities for the success of their firms. It generates insights that can guide policy makers to promote innovation and relational capabilities in the wood-and metalmanufacturing sub-sector. Originality/value-The paper contributes to the debate on firms' success by empirically testing the effect of the specific dimensions of organisational capabilities on the success of SMEs operating in a developing economy context. It widens the understanding of how organisational capabilities influence firm success.

This paper discusses productive efficiency of a sample of firms using World Bank data from a sample of 179 Eritrean manufacturing firms. The results of the estimation of the technical efficiency model shows Eritrean manufacturing firms ingeneral are inefficient. The study further investigated firms’ efficiency by nature of ownership, age of firm, experience of the entrepreneur and managers’ education. Both labour and capital are more productive under sole proprietorships or partnerships than incorporated firms. Labour is more productive for older firms and capital is more productive for younger firms. Results also show labour is more productive for firms with less experienced managers, while capital is more productive for high experienced managers. Also, labour is productive for both firms that are managed with less educated managers and high educated managers. In almost all cases return to scale appears to be less than one, suggesting the existence of high inefficiency. In general there was no significant difference in the existence of embodied technology among firms. The study suggests that firms need to examineand invest in technology and skills that may contribute to improved efficiency.