Dynamic capabilities


Dynamic capabilities

Dynamic capability is defined as “the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments”.[1] The basic assumption of the dynamic capabilities framework is that core competencies should be used to create short term competitive positions that can be used to build longer-term competitive advantage.

Contents

Processes

Three dynamic capabilities are necessary in order to meet new challenges. Organizations and their employees need the capability to learn quickly and to build strategic assets. New strategic assets such as capability, technology and customer feedback have to be integrated within the company. Existing strategic assets have to be transformed or reconfigured.[1][2]

Learning

Learning requires common codes of communication and coordinated search procedures. The organizational knowledge generated resides in new patterns of activity, in “routines”, or a new logic of organization. Routines are patterns of interactions that represent successful solutions to particular problems. These patterns of interaction are resident in group behavior and certain sub-routines may be resident in individual behavior. Collaborations and partnerships can be a source for new organizational learning which helps firms to recognize dysfunctional routines and prevent strategic blind spots. Similar to learning, building strategic assets is another dynamic capability. For example alliance and acquisition routines can enable firms to bring new strategic assets into the firm from external sources.

New assets

The effective and efficient internal coordination or integration of strategic assets may also determine a firm’s performance. According to Garvin (1988) quality performance is driven by special organisational routines for gathering and processing information, for linking customer experiences with engineering design choices and for coordinating factories and component suppliers. Increasingly competitive advantage also requires the integration of external activities and technologies: for example in the form of alliances and the virtual corporation. Zahra and Nielsen (2002) show that internal and external human resources and technological resources are related to technology commercialization.

Transformation of existing assets

Fast changing markets require the ability to reconfigure the firm’s asset structure and to accomplish the necessary internal and external transformation (Amit and Schoemaker, 1993). Change is costly and so firms must develop processes to find low pay-off changes. The capability to change depends on the ability to scan the environment, to evaluate markets and to quickly accomplish reconfiguration and transformation ahead of the competition. This can be supported by decentralization, local autonomy and strategic alliances.

See also

References

  1. ^ a b Teece, D., G. Pisano and A. Shuen, 1997, "Dynamic Capabilities and Strategic Management.", Strategic Management Journal, (18:7),pp.509-533
  2. ^ Eisenhardt, K. and J. Martin, 2000, "Dynamic capabilities:What are they?", Strategic Management Journal, (21),pp.1105-1122.

Further reading

Zahra, S.A., Nielsen, A.P.(2002) Sources of capabilities, integration and technology commercialization. Strategic Management Journal, 23; 5; pp. 377–398.


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