Abstract: This study aims to analyze the possession of distinctive capabilities as activators capable of producing better performance than passive resource ownership. The study was conducted on the Regional Development Banks (BPD) in Indonesia. This research uses mixed method research design. The first stage was to collect questionnaire data from 26 BPD for quantitative data analysis. The second stage was the collection of information through in-depth interviews and focus group discussions with the leaders of BPD and the Association of Regional Banks (Asbanda). The results show that the possession of functional capabilities has a strong influence in building distinctive capabilities. The findings indicate that BPD need to develop functional capabilities associated with the bank intermediation function. Success in intermediation is determined by capabilities in segmenting markets.

Key words: distinctive capability; functional capability; cultural capability; regulatory capability; position capability; Regional Development Bank