Organizational Capability Development Paths

Organizational capabilities arise from historical developments and learning resources 7HHFH D. Organization-specific trajectories and the contingent development of organizational capabilities may lead to a ‘sustained source of uniqueness’ and long-WHUPYDOXHFUHDWLRQ7HHFH9HUJQH 'XUDQG HYHQLQDTXLFNO\FKDQJLQJHQYLURQPHQW7HHFHHWDO$FFRUGLQJWR-RKQVRQ WKH IRXQGLQJ FXOWXUH Dnd its technological, economic, geopolitical, industrial and institutional resources limit organizations’ future developments.

Organizations realize their development within the limits of their existing culture and resources. Resulting capability development and trajectories, therefore, are always heterogeneous -DFRELGHV :LQWHU DQG DUH FRQVWLWXWHG IURP ideosyncratic routines. Thus, capability performance outcomes’ heterogeneity across different organizations is obvious, even though the development context (motivation) remains the same 5DKPDQGDG 5HSHQQLQJ.

In the extant literature, the leading emphasis on capability maturity models is thought-SURYRNLQJ$VPHQWLRQHGSUHYLRXVO\5DKDPDQGDG 5HSHQQLQJ support that high performance is not achievable by only injecting best practices DOUHDG\ DSSUHKHQGHG E\ 7HHFH D VLPLODU WR WKH H[WDQW literature’s characterization of project portfolio management capability (PPMC).

+RZHYHU WKH EXVLQHVV-context specificity of capability development paths inscribes high-SHUIRUPLQJ UHVRXUFH URXWLQHV 6FKUH\|JJ 6QRZ 7HHFH 7KHUHIRUHSDWKGHSHQGHQF\UHPDLQVWKHPDLQIHDWXUHRIG\QDPLFFDSDELOLW\

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This contradicts organizational capability development in that originally, the phenomenon of path dependence conceptualizes organizations’ inability to adopt WR QHZ VLWXDWLRQV $UWKXU 7KLV FRQWUDGLFWLRQ EHWZHHQ WKH FRQWLQXRXV renewal of organizational capabilities and path dependence is well noted in the literature (6FKUH\|JJ 6\GRZ9HUJQH 'XUDQG. Meanwhile, it is also an opportunity to learn about capability development limitations, the context specificity of development, and motivation to attain resultant business outcomes.

This PhD research understands that the capability investigation framework (Figure ) based on capability dimensions, routines, and performance outcomes will be valuable in this regard.

Path dependence in its original conceptualization refers to a state where certain institutionalized routines become organizational behavior $DOWRQHQ 6FKUH\|JJ 6\GRZ6\GRZHWDO9HUJQH 'XUDQG)+HQFH through path dependence, certain habits get locked-in as the organizational actors entrap in the system dynamics (Sydow et al.S+RZHYHUWKLVLVQRWD single-shot effect, but rather a tri-staged temporal process of pre-formation, formation, and lock-in of organizational behavior (6FKUH\|JJ 6\GRZ Sydow et al.). During the pre-formation stage, many unpredictable action options are available for selection. A selection from these options “sets off” self-reinforcements for developing predictable patterns of action to follow (Sydow et al. S 7KLV LV WKH VWDUW RI WKH SDWKformation stage, where self-reinforcements emerge from dominant action patterns. The temporal continuity of the formation stage makes the decision-making process irreversible until the lock-in stage is reached. In the lock-in stage, the action patterns become fixed through the ‘deterministic characters’ of increased commitment 6WDZ , which cause a loss of organizational flexibility (Sydow et al.S,QIDFW the path lock-in stage reflects the organizational intentions of making practices DQGURXWLQHVPRUHHIILFLHQWRYHUWLPH+RZHYHUORQJ-term preferences for similar actions will lead to a state where organizations struggle to adapt to changing market needs despite their willingness to do so.

Therefore, organizations are interested in avoiding the lock-in situations because of probable future inefficiencies, and must find a way to enable divergence and break their fixed paths. It is through changing organizational realities [according to the critical realist philosophical stance of this PhD research, mental models and shared vision are part of organizational realities], which provide exogenous shocks for alternate path formation (GDUXG HW DO Sydow et al. 9HUJQH 'XUDQG

In practice, these shocks are frequent and may lead to avoiding organizational lock-LQ9HUJQH 'XUDQG2UJDQL]DWLRQVWKURXJKWKHLUUHVRXUFHVYDU\LQ apprehending the rate and frHTXHQF\ RI H[WHUQDO H[RJHQRXV VKRFNV +HOIDW :LQWHU7KHPRVWFRPSHOOLQJRIWKHDSSUHKHQGHGVKRFNVDUHWKHQUHVSRQGHG WRWKURXJKUHVRXUFHUHFRQILJXUDWLRQVDQGWUDQVIRUPDWLRQV7HHFHOHDGLQJ to capability renewal, replication, or retrenchPHQW +HOIDW 3HWHUDI +RZHYHUVKHGGLQJDOUHDG\GHYHORSHGFDSDELOLWLHVDQGURXWLQHVLVOHDVWH[SHQVLYH WKURXJKURXWLQL]HGDFWLRQV+HOIDW :LQWHU6FKLONH:LQWHU In this vein, the leading organizations routinize their ability to sense environmental conditions and seize resource commitments while transforming WKHLUIXWXUHSDWKV7HHFHHWDO7HHFH

Thus, a continuous breaking of existing paths (Sydow et al.DQGFUHDWLQJ new paths is an intentionally accomplished endogenous process (Garud et al., 7KLVLQWHQWLRQDOSURFHVVLVJXLGHGWKURXJKWKHVHOI-reinforcing mechanisms developed during the path formation stage. According to Garud and colleagues WKLVLQWHQWLRQDOLW\UHTXLUHVOHDUQLQJ-based self-reinforcement to establish a big picture about organizational activities, which is the virtue of the systems’

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Self-reinforcement mechanisms are endogenously produced, automated stimuli to specific action patterens in any situation (Sydow et al. S 6HOI-reinforcement mechanisms possess the dynamic capacity to generate positive feedback and negative feedback to the development of lock-LQV$OVFKHU Brauer, *DUXG HW DO Awareness about the dynamics of self-reinforcing mechanisms (Sydow et al. GLUHFWO\ LPSDFWV VWUDWHJLF FKRLFHV DORQJ ZLWK organizational path development *UHYH 6HLGHO. Thus, a learning-based (and actors’ congition-based) manipulation in the selection of self-reinforcing mechnisms should lead to avoiding lock-in situtions while maintaining alignment with organizations’ historical paths 9HUJQH 'XUDQG

3.6.1 Self-reinformcement mechanisms

Various descriptions of reinforcement mechanisms are available in literature 6\GRZ 6FKUH\|JJ 9HUJQH 'XUDQG +RZHYHU WKH FDSDELOLW\

development path dependence discussion in this PhD dissertation is limited to the four categories of self-reinforcement mechanisms (6FKUH\|JJ 6\GRZ 6\GRZHWDO) and, amongst these, the prime focus has been to elucidate the self-reinforcement through learning mechanisms.

a. Coordination mechanisms of self-reinforcement generate efficient operations with lower costs. Coordination mechanisms reinforce path dependence through establishing unified rules to guide the behavior of organizational actors. More actors are willing to adopt and coordinate through rules due to certainty of reactions of the other actors.

Organizations reduce the cost of operations through path dependence reinforcement from coordination mechanisms.

b. Complementary mechanisms of self-reinforcement generate the economies of scope. Over time, organizations learn to exploit synergizes between two or more of its resources, routines, and rules or practices.

Organizations reduce the cost of their products and services through complementarity.

c. Adaptive expectation mechanisms of self-reinforcement build interaction preferences in an organization. These mechanisms generate self-reinforcement to the normative behavior of following the same action patterns because of the prior performance of other individuals in the organizations.

d. Learning mechanisms of self-reinforcement are central to the development of organizational capabilities, especially to those dynamic capabilities that are path-GHSHQGHQW LQ QDWXUH =ROOR :LQWHU EisenhDUGW7HHFHHWDODQGFDQQRWEHERXJKWGLUHFWO\IURP WKHPDUNHWV7HHFHHWDO7HeFH7KHGHJUHHRI path dependence awareness has a direct impact on future strategic HYROXWLRQ $OVFKHU %UDXHU *UHYH 6HLGHO $FFRUGLQJ WR 6\GRZ DQG FROOHDJXHV S OHDUQLQJ PHFKDQLVPV DUH PRVW critical to path dependence. Their explanation is that the learned predictable actions are difficult to replace with other options because establishing new action choices may require additional learning LQYHVWPHQWWRGHYHORSDQHZHUSDWWHUQ+RZHYHUWKHVHQHZDFWLRQSDWWHUQV may not be supported through other mechanisms of self-reinforcement.

This PhD research understands that this approach to learning is driven by single-loop learning, whereas another study proposed to establish double-loop learning-driven capability monitoring to avoid the lock-in stage of path dependence 6FKUH\|JJ .OLHVFK-(EHUO . Similar guidance about path breaking through the double-loop learning is provided in recent research about multinational corporation investment decisions $OVFKHU

%UDXHU . In another study, Rockart and Dutt found that

capability development paths differ because organizations differ in their approach to learning.

This PhD research extends the role of learning mechanisms in term of path-dependent development of organizational capabilities. Therefore, this dissertation includes a dedicated chapter (Chapter 5) to understand organizational learning mechanisms IURPDV\VWHP¶VYLHZ6HQJHDQGUHODWHGFRQVWUXFWVHIIHFWLQJ path-dependent development of capability dimensions and routines.