n today's dynamic business environment, due to the emergence of three influential trends including severe international competition, discrete markets and changing technology, the notion of firm performance is discussed more than ever. The trends have made business researchers pay special attention to the concept of relational capability as a critical factor in enhancing firm performance. And the concept has driven the firm performance towards market, customer and organizational relationships. Therefore the current researches study the effect of relational capabilities on the firm performance of small companies of Kermanshah Industrial city. Seven hypotheses were proposed for this purpose. The research method, according to the purpose of applied research and the manner of data collection is a descriptive and the analyzing of the model specifically is based on structural equation modeling (SEM) via AMOS software. The Statistical population included managers of small and medium industrial companies in the city of Kermanshah. Stratified sampling method, observations related to the questionnaire and variables of each question of the hypothesis were presented with a scale of 1 to 20. The results of the current research showed significant positive correlation between relational capabilities and firm performance. The overall obtained results of testing the research hypotheses were confirmed the proposed relations of the research. Establishing relationship with other companies predicts the maximum rate of changes in relational capabilities.
