Purpose - This study examines the impact of supply chain capabilities and knowledge management capabilities on the business performance of chain stores with a mediating role of competitive advantage. This study provides the better understanding about key constructs such as supply chain capabilities and knowledge management capabilities that influence Mashhad chain stores business performance.

Design/methodology/approach - This research is applied in terms of purpose, descriptive in nature and method, and survey-causal. Causal research design is used to identify cause-and-effect relationship among the constructs. The authors derive measures of the model from existing literature and expert opinion. Questionnaire method is used to gathering data. The statistical population of the study were managers and employees of finance, marketing, research and development, distribution and information technology, as well as suppliers of different branches of first-level chain stores in Mashhad, Iran, including Shahrema, Refah, Ofogh Kourosh, Hypermi, Bama and Etka. The author develops a conceptual model for the business performance of chain stores. This study uses a quantitative approach to test the proposed hypotheses, using Structural Equation Modeling (SEM) and SPSS and AMOS software.

Findings - Results show that supply chain capabilities significantly influence competitive advantage and business performance, and knowledge management capabilities significantly influence competitive advantage and business performance. Also, competitive advantage mediating the impact of supply chain capabilities and knowledge management capabilities on the business performance.

Originality/value – Almost, no study has examined supply chain capabilities and knowledge management capabilities constructs related to competitive advantage and business performance of Mashhad chain stores. The findings of this study imply several practical directions for them.