The performance of Target Cost Management(TCM) systems has been rigorously investigated during the last two decades, but the extent of empirical research on TCM is limited. A major objective of this study is to examine the relationship between critical success factors(organizational capabilities) and performance of TCM systems. Two hypothesis were formulated & tested : (1) The impact of critical success factors on performance and to what extent does certain critical success factors correlate with performance? (2) How does the relationship between critical success factors and performance differ by types of performance? Results from the study show that dynamic capabilities(process & architecture capabilities) impact significantly on performance. and that impact extends to all types of performance, i.e., cost reduction, R&D efficiency, and quality & time. The results also show that differences in performance of organizations grouped by types of performance could be found.