What is the role of IT capability in a competitive environment? Does IT capability contribute to the initiation of strategic actions within firms? To understand the relative position of IT in firms, we calculated the IT capability gap. This research has developed a research model in which the IT capability gap between two competing firms influences the leanness of a leading firm (Eroglu and Hofer, 2011). Also, we have suggested how the leanness of a firm is related to financial performance (i.e., ROS). Theoretically, this study is grounded in the competitive dynamics perspective (Ferrier et al., 1999), which emphasizes the role of rivalry between two competing firms. We empirically tested the research model using secondary data sets comprising of 322 firm-year panel data from 2002 to 2009. We have concluded that the IT capability of firms has a critical role to implement lean practices and eventually enhances firm performance.