Organizational Dynamic Capabilities

3.4.1 Dynamic capability view (DCV)

In the modern strategic management literature, one of the most popular current research topics is dynamic capability view (DCV) 3HWHUDI HW DO 9RJHO

*WWHO$V\VWHPDWLFOLWHUDWXUHUHYLHZE\0RXOGHUVDQG6WHIDQRHWDO FRQILUms the resource-EDVHG YLHZ 5%9 %DUQH\ URRWHG LQ WKH RULJLQDWLRQRIWKHG\QDPLFFDSDELOLW\YLHZRIRUJDQL]DWLRQ7HHFH 3LVDQR 7HHFH HW DO 7KH SLRQHHULQJ VFKRODU RI WKLV FRQFHSW 'DYLG 7HHFH DOVR establishes the intimacy of dynamLF FDSDELOLW\ YLHZ VHH 7HHFH ZLWK D 6FKXPSHWHULDQ YLHZ RI RUJDQL]DWLRQDO LQQRYDWLRQ 6FKXPSHWHU DQG 3HQURVH¶V YLHZ RI HQWUHSUHQHXULDO UHVRXUFHV 3HQURVH $GGLWLRQDOO\

0XOGHUV DQG 6WHIDQR HW DO DOVR KLJKOLJKWHG WKH LQForporation of HYROXWLRQDU\ WKHRU\ 1HOVRQ :LQWHU, NQRZOHGJH-based view (Grant, WUDQVDFWLRQ FRVW WKHRU\ :LOOLDPVRQ , behavioral theory &\HUW 0DUFK, network theory *UDQRYHWWHU, and positioning view (Porter, RI DQ RUJDQL]DWLRQ LQWR G\QDPLF FDSDELOLW\ VFKRODUVKLS 7KH motivation of the dynamic capability view was to highlight the source of sustained competitive advantage (TeHFH– dynamic capabilities are about consistent PDUNHWOHDGHUVKLS7HHFH

During the last decade, a notable body of literature was dedicated to organizational capabilities research, with a stark focus on dynamic capabilities and their performance outcomes 3HWHUDIHWDO9RJHO *WWHO. Among those are also studies on the microfoundations of capabilities )HOLQ )RVV$

JRRGH[DPSOHRIVXFKZRUWK\DWWHPSWVLVDUHFHQWO\SXEOLVKHGDUWLFOHE\+HOIDW 3HWHUDIZKRIRFXVHGRQLQGLYLGXDOFRJQLWLRQ-based capabilities as dynamic capability microfoundations. Another such example is a study by Barrales-Molina and colleagues that developed a microfoundations-based framework for G\QDPLF PDUNHWLQJ FDSDELOLWLHV +RZHYHU LW ZDV QRWHG WKDW WKH FDSDELOLW\

microfoundations approach is still in its construction phase %DUQH\ )HOLQ )HOLQ HW DO . Therefore, attempts to explain dynamic capabilities through microfoundations, the role of agency, and performance impact on business outcomes remained unclear and confusing. According to Wilden and colleagues WKHUHLVQRXQDQLPRXVGHILQLWLRQRIG\QDPLFFDSDELOLWLHVDQGWKHLUUROHLQ organizational success is unclear :LOGHQ HW DO Resolving these discrepancies remains a scholarly challenge (Wilden et al.,

$QRWKHUUHOHYDQWVWXG\E\3HWHUDI +HOIDWQRWHGWKDWWKHPDMRULW\RIWKH literature on dynamic capability view is divided between two bodies of scholarship:

WKHILUVWE\7HHFHDQG&ROOHDJXHVDQGWKHVHFRQGE\(LVHQKDUGWDQG0DUWLQ (2$FFRUGLQJWR3HWHUDI +HOIDWSWKHPDMRUGLYLVLRQLVRYHU (i) relevance of dyanmic capabilities to the business environment change rate and (ii) ability of dynamic capabilities to first attain and then sustain a competitive advantage. Meanwhile, this PhD research confirms another major difference over the imitability and transferability of the dynamic capabilities of an organization VHH7HHFH7KHUHVRXUFH-based view (RBV) position is that imitable and transferable resources and consequent capabilities cannot be a source of long-WHUP FRPSHWLWLYH DGYDQWDJH %DUQH\ , ,PLWDEOH DQG WUDQVIHUDEOHFDSDELOLWLHVDUHVHOODEOHLQWKHPDUNHWDVEHVWSUDFWLFHVKRZHYHUEHVW practices cannot be source of sustained coPSHWLWLYH DGYDQWDJH %DUQH\

(LVHQKDUGW 0DUWLQ 7HHFH ,Q VKRUW ³our understanding about dynamic capabilities and how they work is still incomplete”

7HHFHS

Is there any rationale to highlight the dynamic capability view and its discrepancies LQ WKLV 3K' UHVHDUFK" <HV LW DFWXDOO\ UHIOHFWV WKH VROH FRQVHQVXV LQ VWUDWHJLF management literature: dynamic capabilities are path-dependent and evolve from RUJDQL]DWLRQDO KLVWRULHV (LVHQKDUGW 0DUWLQ 7HHFH HW DO Understanding the capability path dependence is among the primary ambitions of WKLV3K'UHVHDUFK/HDUQLQJDERXWWKHVHOHFWHGFDSDELOLW\330&GHYHORSPHQWLQ different business divisions of a single enterprise will enhance our understanding of the capability development process and its underlying learning mechanisms.

Project portfolio management (PPM) is rarely studied in terms of organizational capabilities, and the available scholarship has generalized project portfolio management capability (PPMC) as a dynamic capabilty for any organizational V\VWHPWKHLUDSSURDFKLVFORVHUWRWKDWRI(LVHQKDUGWDQG0DUWLQ

The preceding sections of this chapter further develop the generalized capability development framework (Figure ) to understand dynamic capabilities (theoretical contribution for further development in future research) and the path-dependent development of organizational capabilties and self-reinforcing mechanisms.

3.4.2 Dynamic capability characteristics

What is a dynamic capability? $FFRUGLQJWR7HHFH³G\QDPLF capabilities are higher-level competences that determine the firm’s ability to

integrate, build and reconfigure internal and external resources/competencies to adress, and possibly shape, rapidly changing business environment” (Teece et al., S3UHFLVHO\VSHNDLQJ6\GQH\:LQWHUH[SHFWHGG\QDPLFFDSDELOLWLHV³WR extend, modify or create” the ordinary capabilities of an organization (Winter, S ,W ZDV IXUWKHU H[SODLQHG E\ +HOIDW DQG FROOHDJXHV WKDW dynamic capabilities maintain the fitness between organizational development and its business environment (referred to as evolutionary fitness).

$FFRUGLQJ WR 7HHFH DQ RUJDQL]DWLRQ¶V G\QDPLF capabilities take longer periods, possibly many years and decades, to develop. It is due to the ‘imperfect market factors and non-tradability’ of firm-specific resources (assets), which are always idiosyncratic in nature. Therefore, the dynamic capabilities of an organization are always (business) context-VSHFLILF+HOIDWHWDO SDQGKHQFHDUHDOVRpath-GHSHQGHQW(LVHQKDUGW 0DUWLQ7HHFH HWDO7HHFH7KHDUWLFXODWHGFKDUDFWHULVWLFVRIG\QDPLFFDSDELOLWLHV are comparable to the ordinary capabilities (see: Table ), and the relevant details DUHLQFOXGHGLQVHFWLRQVDQGRIWKLVGLVVHUWDWLRQ

Table 6. Comparing some characteristics of operational and dynamics cDSDELOLWLHVOHDUQHGIURP7HHFHDQG7HHFHDDQG 6KXHQHWDO

Characteris-tics Ordinary Capabilities Dynamic Capabilities Purpose Technical efficiency of

business functions Achieving congruence with changing customer needs through technical opportunities and business environment Attainability Buy or build (adaptive

learning) Build ( through generative learning)

(Tripartite)

Schema Operate, administrate,

and govern Sense, seize, and transform

Key routines Best practices Signature (upgraded) processes

Managerial

Emphasis Cost control for efficiency Entrepreneurial approach to resource orchestration, leadership and learning Priority Doing things right Doing the right things Imitability Relatively imitable Inimitable

Focus result Technical fitness

(operational efficiency) Evolutionary fitness (innovation through ongoing learning, capability enhancement and alignment)

Dynamic capabilities, context-specific and path-dependent in nature, are not acquired as best practices, but by the learned ‘signature processes and routines’ of DQRUJDQL]DWLRQ7HHFH. Organizations learn these signature processes and routines from their development paths, processes, and resource positions (Foss et DO 7HHFH HW DO =ROOR :LQWHU 7KURXJK LWV G\QDPLF capabilities, a successful organization routinizes the sensing of opportunities [endogenous and exogenous shocks], seizing the most valuable opportunities through resource commitment decisions, and transforming its resource base to PDLQWDLQHYROXWLRQDU\ILWQHVV+HOIDWHWDO7HHFHHWDO7HHFH D

In the recent establishment of the dynamic capability concept, the dynamic capability characteristics of sensing, seizing, and transformation are distributed between an “organization’s managers, experts, and even line workers” across RUJDQL]DWLRQDOIXQFWLRQVDQGKLHUDUFKLHV7HHFHS+HQFHWKLV3K' research learned that dynamic capabilities are not ad hoc activities, but are instead routinized actions of organizational resources. This is consistent with the earlier JXLGDQFHIURP6\GQH\:LQWHU