Dynamic Capabilities

Based on RBV theory, capabilities can be viewed as static (operational) and dynamic capabilities (adaptation and change). Teece et al. (1997) have proposed an extension to the resource-based view theory which has been termed the “dynamic capabilities” approach. The author analyzed dimensions of firm-specific capabilities which became a source of

advantage. The work also explained how combinations of competences and resources can be developed, expanded and defended.

This approach highlights how a company can recognize and benefit from its current internal and external competencies when marketing environment and customer needs are changing.

Maley (2015) defines dynamic capability as“the capacity of the organization to purposefully create, extend or modify its resources and capability bases to address changes in its environment” (2015: 57). Cepeda and Vera (2007) expand on Maley’s definition and argue that dynamic capabilities empower the firm to change, adapt, integrate and reconfigure resources and operational capabilities. Particular emphasis is placed on improvement of management capabilities and difficult-to-imitate combinations of organizational, functional and technological skills (McIvor, 2005).

Barnеy (2002) has demonstrated that it is possiblе to apply thе rеsourcе-basеd viеw for analyzing the strеngths and wеaknеssеs of an organization and rеcognizing the dynamic of organizational development. The author suggests that dynamic capabilitiеs approach can be useful in changing logistics еnvironmеnt. Organizations arе incrеasingly practicing the approach with notablе bеnеfits such as rеduction in opеrations cost, improvеmеnt in flеxibility and opеrationalization of logistics sеrvicеs, rеduction in capital invеstmеnt (Rahman, 2011). Giri and Sarker (2016) suggеst that companiеs rеcoursе to 3PL to rеducе thе load of logistics tasks, ensure customеr satisfaction and achieve compеtitivе advantagе (Chen, Goan, & Huang, 2011).

According to Barney (2002), a resource with potential to create competitive advantage must meet four particular criteria, which are presented in detail further in this section.

Value regulates whether the company’s resources and capabilities are able to react dynamically to opportunities or threats. The resources and capabilities are considered to be valuable only if they allow the company to seize opportunities and counter threats. Thereby, these resources should help the organization to fulfill the criteria necessary to succeed in business environment (McIvor, 2005). Barney (2002) argues for the importance of

understanding value links between the analysis of internal capability, i.e. strengths and weaknesses, and external opportunities and threats.

Value of a resource is a determined among other characteristics by itsrarity. If a number of competitors possess the same resource it is unlikely to be a source of competitive advantage.

Resources with these aspects are often considered to be basic resources necessary for survival. A valuable resource that israre amongst present and potential competitors will take the position of a competitive advantage and be a part of dynamic capabilities. Nevertheless, over a period of time valuable and rare resources can become basic resources as competitors copy or improve on them (McIvor, 2005). Valuable and rare resources can be listed as a source of competitive advantage. Nevertheless, it is important to acknowledge how quickly and easily competitors copy a valuable and rare resource owned by an organization.

According to McIvor (2005), valuable and rare resources can also be a source of sustainable competitive advantage only if competitors struggle to gain a cost advantage by replicating valuable resources of an industry leader. Resources that demonstrate these characteristics are definied as imperfectly imitable (Lippman and Rumelt, 1982; Barney, 1986). Dierick and Cool (1989) recognized five main factors, that can delay imitation of valuable and rare resources.

- Time-compression diseconomies: additional costs appear when an organization attempts to acquire resources under time pressure.

- Asset mass efficiencies: concentrating resources when the company’s existing stock of assets is small relative to the competitor’s stock can be costly.

- Asset interconnectedness: the lack of supplementary resources can prevent a company from concentrating resources.

- Asset erosion:regardless of what the resource basis is, it can break down over a time.

- Causal ambiguity: it might not always be possible to decide which factors or processes are needed for required resources.

Barney (2002) states that a company should be organized in a way that enables it to easily assess its resources and capabilities. Under company’s organization Barney (2002) intends

number of characteristics such as reporting structure, management control systems and compensation policies. Amit and Schoemaker (1993) characterize these as dependent resources and capabilities because of their limited ability to create competitive advantage on their own. Moreover, combining with other resources, an organization can achieve more significant competitive advantage.

One important area of this research is to verify whether the RBV of the firm mostly gives priority to sustainable competitive advantage, while dynamic capabilities view concentrates mainly on the role of competitive endurance in organizations response to frequently changing business position at the market. As proposed by Porter (1988) it is important to understand that RBV and the dynamic capabilities manage organizational strategy through performance rather than through the market position approach. Porter also highlighted the value of internal resources as oppose to focusing on external environment. Dynamic capabilities view van be challenging to utilize due to the fact that it deals with changing internal factors, which are generally not measurable. (Ambrosini et.al., 2009). The most significant reason for analyzing both theories together is the possibility to gain new forms of competitive advantage through remodeling of base resources and competences (Fossas, 1999).