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This article aims to explain the variation in firm performance in the German food processing industry. Building on the resource‐based view, both drivers and outcomes of firm performance were defined as relative concepts. Performance was measured as relative return on assets and sales, relative change in sales, and by combining these variables into an integrated performance measure. Data for the analysis was gathered in an online firm survey and analyzed by means of nonparametric correlation and regression analysis. The survey response was very low and the sample may not be a good representation of the population. However, the results indicate that the main drivers for firm advantages lie within technology and production‐related areas. They further suggest that with firm‐specific variables, it is possible to explain as much as two‐thirds of the variation in profitability. [Q130, L250, D240]. © 2008 Wiley …