Understanding dynamic capabilities: progress along a developmental path

Abstract

Theory development in dynamic capabilitiesEmerging and evolving theories develop slowly, over long periods of time. As Williamson (1999: 1094) observes, 'big ideas often take a long time to take on definition'. This was certainly the case for transaction cost economics, which, early on, was viewed as a tautological concept with no testable or practical implications; it took 35 years before scholars were able to operationalize this theory and begin testing it empirically (Williamson, 1993a). The process of developing evolutionary economics took place, likewise, over many years (Nelson and Winter, 1982). Even the comparatively simple concept of bounded rationality, which evolved out of Barnard's (1938) notion of 'intended rationality', took a long time to take shape and take hold (Williamson, 1993b).Theory concerning dynamic capabilities has had little time to develop, in relative terms. As a field of inquiry, it is still in its infancy; the work remains mostly conceptual and focused on foundational level issues, including the definition of the term (see, for example, the bibliographic evidence provided by Di Stefano et al., 2009). As Kuhn (1970) notes, early versions of new theoretical ideas tend to be rough around the edges. Terms that are vague and elastic may offer the advantage of facilitating a more flexible development path (Winter, 1995).A&B fault dynamic capabilities research for its lack of clarity, oversimplified dynamics, unresolved measurement issues and weak empirical support. What they fail to see is that these so-called 'deficiencies' are the tell-tale signs of early-stage development of an area of inquiry. They expect a good deal more of young, emerging fields than we think reasonable. This is evident from their assertion that theories 'need to start with something that looks like a theory or a model'. To us, this seems rather like Athena springing forth from Zeus's forehead fully armed. Their notion of how theories develop seems especially illsuited to management research, which seeks to understand complex, real-world phenomena. Theories that make sense of complexity do not come neatly prepackaged, and often develop slowly.Although dynamic capabilities began as an 'approach' to understanding strategic change (Teece et al., 1997), rather than as a 'theory', there are clearly identifiable theoretical foundations. Chief among these is evolutionary economics (Nelson and Winter, 1982) from which the attention to routines and path dependence derives. Evolutionary economics draws heavily on Simon (1947) and Cyert and March (1963), giving dynamic capabilities a direct behavioral birthright. 2 In contrast to the assertions of A&B, dynamic capabilities directly address concerns rooted in behavioral theory, including organizational growth, routines and processes, organizational learning and managerial decision-making (see, for example, Helfat et al., 2007;Teece, 2007;Zollo and Winter, 2002). Eisenhardt and Martin's (2000) influential treatment explicitly uses an organization theory (and thus behavioral) len...

Modern Resource-Based Theory(ies)

“…Accordingly, dynamic capabilities may perform different tasks that alter the resource base, such as new product development, alliance formation, or post-acquisition integration (Eisenhardt & Martin, 2000). According to the dynamic capability (DC) approach, a firm's capacity to alter its resource base indirectly influences economic profitability (Helfat and Peteraf, 2009). Superior dynamic capabilities allow firms enable firms to adapt more quickly and effectively to a changing business environment, creating a stream of temporary competitive advantages over time (Teece et al, 1997;Zott, 2003;Helfat et al, 2007).…”

Heterogeneity in dynamic capability configurations: Equifinality and strategic performance

“…Strategic reconfiguring processes influence firm performance (Helfat & Peteraf, 2009) and enable firms to adapt more quickly and effectively, creating a stream of temporary competitive advantages (Teece et al, 1997;Helfat et al, 2007). By reconfiguring their business in novel ways, firms can leverage new opportunities and new sources of economic value (Galunic & Rodan, 1998).…”

How do dynamic capabilities transform external technologies into firms’ renewed technological resources? – A mediation model

“…The dynamic capabilities view (DCV) focuses on how firms' internal capabilities help transform resources into advantaged firm performance (Barney, 1991;Penrose, 1959;Teece, Pisano, & Shuen, 1997). The recent theoretical development recognizes that it is the combination of valuable, rare, imperfectly imitable, and non-substitutable (VRIN) resources and capabilities that lead to a firm's renewed/reconfigured resource base, which eventually creates competitive advantages (Eisenhardt & Martin, 2000;Newbert, 2008;Helfat & Peteraf, 2009). …”