Innovation: Teece and Exploring the Core Components of Dynamic Capabilities

Powerful Essays
Exploring the Core Components of Dynamic Capabilities

Abstract

The concept of dynamic capabilities was introduced by Teece & Pisano (1994) and Teece, Pisano, & Shuen (1997)who asserted that in a dynamic environment a firm’s competitive advantage will rest on the firm’s internal processes and routines that enable the firm to renew and change its stock of organizational capabilities thereby making it possible to deliver a constant stream of new and innovative products and services to customers. Capabilities are complex bundles of skills and knowledge that are exercised through organizational processes. Capabilities thus describe the effectiveness in undertaking processes relative to the competition (Nelson & Winter, 1982), and the literature has also shown a close link between capabilities and their underlying processes (Sambamurthy, Bharadwaj, & Grover, 2003; Tecce, 2007; Wnag & Amhed, 2007).

A fundamental issue for researchers and managers is to understand and leverage dynamic capabilities – the ability to reconfigure operational competencies to address turbulent environments. However, previous porter has viewed dynamic capabilities have been viewed as abstract phenomena with no set prossesses therefore hard, virtually impossible to the competitor to replicate. To enable managers to leverage dynamic capabilities, this research proposes a set of core components to capture the effectiveness in undertaking the key processes of dynamic capabilities, in terms of effectively undertaking the reconfiguration process. Which are sensing capability, absorptive capability, integrative capability and innovative capability. Finally, some implications for managers are also discussed.

Keywords: dynamic capabilities, core components of dynamic capabilities, firm performance.

INTRODUCTION

How firms create and sustain competitive advantage is the fundamental issue in the field of strategic management(Rumelt, Schendel, & Teece, 1994; Zott, 2003). The



References: Amit, R., & Schoemaker, P. J. (1993). Strategic assets and organizational rent. Strategic Management Journal, 14 (1), 33-46. Bain, J. S. (1959). Industrial Organization. Wiley, New York. Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99-120. Barney, J. (2001). Resource-based theories of competitive advantage: A ten-year retrospective on the resource-based view. Journal of Management, 27, 643-650. Bierly, P. E. & Chakrabarti, A. K.. (1996). Technological learning, strategic flexibility, and new product development in the pharmaceutical industry. IEEE Transactions on Engineering Management, 43: 368-380. Blyler M. & Coff, R. W. (2003). Dynamic capabilities, social capital, and rent appropriation: ties that split pies. Strategic Management Journal, 24: 677-686. Chang, H. R. & Hou, J. J. (2007). Organizational change and dynamic capabilities; A case of high-tech company. Industrial Forum, 9 (1), 15-29. Cohen, M. A., & Levinthal, D. (1990). Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35 (1), 128-152. Deeds, D. L., DeCarolis, D., & Coombs, J. (1999). Dynamic capabilities and new product development in high technology ventures: An empirical analysis of new biotechnology firms. Journal of Business Venturing, 15, 211-229. Delmas, M. A. (1999). Exposing strategic assets to create new competencies: The case of technological acquisition in the waste management industry in Europe and North America. Industrial and Corporate Change, 8, 635-650. Dosi, G., Nelson, R., & Winter, S. (2000). Introduction: The nature and dynamics of organizational capabilities. in. Dosi, G., Nelson, R., & Winter, S. (Eds.) (2000). The Nature and Dynamics of Organizational Capabilities. Oxford University Press, Oxford. Dutta S., Narasimhan, O. & Rajiv, S. (2003). Conceptualization and measuring capability: methodology and empirical application. Strategic Management Journal, 24: 667-686. Eisenhardt, K. M. & Martin, J. A. (2000). Dynamic capabilities: what are they? Strategic Management Journal, 21: 1105-1121. Ethiraj S. K., Kale, P., Krishnan, M. S., & Singh, J. V.. (2005). Where do capabilities come from and how do they matter? a study in the software service industry. Strategic Management Journal, 26: 25-45. Galunic, D. C., & Rodan, S. (1998). Resource recombination in the firm: Knowledge structures and the potential for Schumpeterian innovation. Strategic Management Journal, 19, 1193-1201. George, G. (2005). Learning to be capable: patenting and licensing at the Wisconsin Alumni Research Foundation 1925–2002. Industrial and Corporate Change, 14, 119-151. Grant, R. M. (1996). Prospering in dynamically-competitive environments: Organizational capability as knowledge integration. Organization Science, 7 (4), 375-388. Griffith, D. A., & Harvey, M. G. (2001). A resource perspective of global dynamic capabilities. Journal of International Business Studies, 32 (3), 597-606. Helfat, C. E. (1997). Know-how and asset complementarily and dynamic capability accumulation: The case of R&D. Strategic Management Journal, 18 (5), 339-360. Ho, Y. C., & Tsai, T. H. (2006). The impact of dynamic capabilities with market orientation and resource-based approaches on NPD project performance. Journal of American Academy of Business, 8 (1), 215-228. Iansiti, M. and K. B. Clark. (1994). Integration and dynamics capability: evidence from product development in automobiles and mainframe computers. Industrial and Corporate Change, 3: 557-605. King, A. A., & Tucci, C. L. (2002). Incumbent entry into new market niches: The role of experience and managerial choice in the creation of dynamic capabilities. Management Science, 48 (2), 171-186. Kogut, B., & Zander, U. (1996). What firms do? Coordination, identity, and learning. Organization Science, 7 (5), 502-518. Lazonick, W., & Prencipe, A. (2005). Dynamic capabilities and sustained innovation: Strategic control and financial commitment at Rolls-Royce Plc. Industrial and Corporate Change, 14, 501-542. Leonard-Barton D. (1992). Core capabilities and core rigidities: a paradox in managing new product development. Strategic Management Journal. 13: 111-125. Luo, Y. (2000). Dynamic capabilities in international expansion, Journal of World Business, 35 (4), 355-378. Mahoney, J. & Pandian, J. (1992). The Resource-based View within The Conversation of Strategic Management. Strategic Management Journal, 13, pp. 363-380. Mason, E. (1949). The current state of the monopoly problem in the U.S., Harvard Law Review, 62, pp. 1265–1285. Menguc, B. & Auh, S. (2006). Creating a firm-level dynamic capability through capitalizing on market orientation and innovativeness. Journal of the Academy of Marketing Science, 34 (1), 63-73. Nelson, R., & Winter, S. G. (1982). Evolutionary Theory of Economic Change. Belknap Press of Harvard University Press, Cambridge, MA. Newbert, S. L. (2005). New firm formation: a dynamic capability perspective. Journal of Small Business Management, 43 (1), 55-77. Okhuysen, G. A., & Eisenhardt, K. M. (2002). Integrating knowledge in groups: How formal interventions enable flexibility. Organization Science, 13 (4), 370-386. Pan, S., Pan, G. M. & Hsieh, H. (2006). A dual-level analysis of the capability development process: a case study of TT&T. Journal of the American Society for Information Science and Technology, 57(13): 1814-1829. Pavlou, H. (2004). IT-enabled dynamic capabilities in the new product development: Building a competitive advantage in the turbulent environments. doctoral dissertation, University of Southern California. Penrose, E. (1959). The Theory of the Growth of th Firm. Basil Blackwell, London. Petroni, A. (1998). The analysis of dynamic capabilities in a competence-oriented organization. Technovation, 18(3): 179-189 Pettus, M Porter, M. E. (1980). Competitive Strategy: Techniques for analyzing Industries and Competitors. Free Press: New York. Prahalad, C. K. & Hamel, G. (1990). The core competence of the corporation. Harvard Business Review, 68(3), pp. 79–91. Priem, R. L., & Butler, J. E. (2001). Is the resource-based ‘view’ a useful perspective for strategic management research? Academy of Management Review, 26 (1), 22-40. Roy, P., & Roy, P. (2004). The Hewlett Packard–Compaq computers merger: Insight from the resource-based view and the dynamic capabilities perspective. Journal of American Academy of Business, 5 (1/ 2), 7-14. Rumelt, R., Schendel, D.,& Teece, D. (1994). Strategic management and economics, Strategic Management Journal, 12, 5-29. Salvatos, C. (2003). The role of micro-strategies in the engineering of firm evolution. Journal of Management Studies, 40 (1), 83-108. Sambamurthy, V., Bharadwaj, A. S., & Grover V. (2003). Shaping agility through digital options: Reconceptualizing the role of IT in contemporary firms. MIS Quarterly, 27 (2), 237-263. Sanchez, R. (2004). Understanding competence-based management: Identifying and managing five modes of competence. Journal of Business Research, 57(5): 518-532. Schumpeter, J. A. (1942). Capitalism, Socialism, and Democracy. Harper, New York. Shapiro, C. (1989). The theory of business strategy. RAND Journal of Economics, 20(1), 125–137. Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28, 1319-1350. Teece, D. J., & Pisano, G. (1994). The dynamic capabilities of firms: an introduction. Industrial and Corporate Change, 3 (3), 537-556. Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal,18 (7), 509-533. Tripsas, M. (1997). Surviving radical technological change through dynamic capability: Evidence from the typesetter industry. Industrial and Corporate Change, 6 (2), 341-377. Verona, G., & Ravasi, D. (2003). Unbundling dynamic capabilities: an exploratory study of continuous product innovation. Industrial and Corporate Change, 12, 577-606. Wang, C. L., & Ahmed, P. K. (2004). The development and validation of the organisational innovativeness construct using confirmatory factor analysis. European Journal of Innovation Management, 7 (4), 303-313. Wang, C. L., & Ahmed, P. K. (2007). Dynamic capabilities: A review and research agenda. International Journal of Management Reviews, 9 (1), 31-51. Wernerfelt, B. (1984). A resource-based view of the firm. Strategic management journal, 5 (2), 171-180. Wheeler, B. C. (2002). NEBIC: A dynamic capabilities theory for assessing net-enablement. Information Systems Research, 13 (2), 125-146. Winter, S. (2003). Understanding Dynamic Capabilities. Strategic Management Journal, 24:10, 991-995. Woiceshyn, J., & Daellenbach, U. (2005). Integrative capability and technology adoption: evidence from oil firms. Industrial and Corporate Change, 14 (2), 307-342. Zollo, M. & Winter, S. (2002). Deliberate learning and the evolution of dynamic capabilities. Organization Science, 13: 339-351. Zott, C. (2003). Dynamic capabilities and the emergence of industry differential firm performance: Insights from a simulation study. Strategic Management Journal, 24 (2), 97-125.

You May Also Find These Documents Helpful

  • Powerful Essays

    International Journal of Innovation Management Vol. 5, No. 3 (September 2001) pp. 377–400 © Imperial College Press DEVELOPING INNOVATION CAPABILITY IN ORGANISATIONS: A DYNAMIC CAPABILITIES APPROACH BENN LAWSON Department of Accounting, The University of Melbourne Victoria, 3010, Australia e-mail: blawson@unimelb.edu.au DANNY SAMSON Department of Management, The University of Melbourne Victoria, 3010, Australia e-mail: d.samson@unimelb.edu.au Received 1 February 2001 Revised 18…

    • 9070 Words
    • 37 Pages
    Powerful Essays
  • Good Essays

    Teece Model of Innovation

    • 499 Words
    • 2 Pages

    Innovation is a process to bring new ideas, new methods or new products to an organization. It is the action required to create new ideas, processes or products which when implemented lead to positive effective change. While invention requires the creation of new ideas, processes or products, innovation moves one step further and requires implementation of the inventive act. Innovation also implies a value system which seeks to derive a positive outcome from the inventive act. For example, actions…

    • 499 Words
    • 2 Pages
    Good Essays
  • Powerful Essays

    Dynamic Capability

    • 11545 Words
    • 47 Pages

    Strategic Management Journal Strat. Mgmt. J., 21: 1105–1121 (2000) DYNAMIC CAPABILITIES: WHAT ARE THEY? KATHLEEN M. EISENHARDT* and JEFFREY A. MARTIN Department of Management Science and Engineering, Stanford University, Stanford, California, U.S.A. This paper focuses on dynamic capabilities and, more generally, the resource-based view of the firm. We argue that dynamic capabilities are a set of specific and identifiable processes such as product development, strategic decision making, and…

    • 11545 Words
    • 47 Pages
    Powerful Essays
  • Good Essays

    Dynamic Capabilities

    • 344 Words
    • 2 Pages

    1a) Dynamic capabilities are abilities which enable the organisation to renew and recreate its strategic capabilities to meet the needs of the changing environment. It is the capacity of an organisation to change which enables them to adapt more readily. Sustainable competitive advantage relies on resources, competencies and capabilities evolving with the dynamics of the industry. Sustainable competitive advantage is achieved when an organisation’s capabilities are of value to customers, unique…

    • 344 Words
    • 2 Pages
    Good Essays
  • Better Essays

    Online Library (wileyonlinelibrary.com) DOI: 10.1002/csr.251 Strategic Corporate Social Responsibility: A ‘Dynamic Capabilities’ Perspective Venugopal Ramachandran* Insitute for Financial Management and Research, Chennai, India ABSTRACT In this paper, strategic corporate social responsibility (CSR) is defined on the basis of Porter’s theory of competitive advantage. Two kinds of dynamic capabilities are proposed as the precursors to strategic CSR success and operationalized in terms of two sets of associated…

    • 5842 Words
    • 20 Pages
    Better Essays
  • Good Essays

    2010 The Dynamics of Strategic Capability Jokull Johannesson Northampton Business School University of Northampton E-mail: jokull.johannesson@northampton.ac.uk Iryna Palona University of Liverpool Abstract The strategic capability concept and its integration into the strategic planning process in international business have not been sufficiently explored as its conflicting definitions indicate. Moreover international managers may not be aware of the need for strategic capability because…

    • 6131 Words
    • 25 Pages
    Good Essays
  • Best Essays

    Course Title: Strategy & Policy Section: A Semester: Fall 2012 Program: MS-Mgt Assignment #5 [Position Paper: Dynamic Capabilities and Strategic Management] Submitted to: Dr. Sarwar M. Azahar Submitted by: Syed Shahid Hussain 12013092-016 Maham Shahid 12014092-001 Rehman Asif 12013092-011 Due Date: 13th December 2012 Submission Date: 13th December 2012 Marks: Comments: _______________________________________________________________________…

    • 2263 Words
    • 10 Pages
    Best Essays
  • Best Essays

    Teece vs. Porter: Perspective of Innovation Studies When a company enters a market, it wants to be successful. Unfortunately most firms fail unless they have an advantage over there competitors. Yet, one question arises; how does one obtain this competitive advantage? One issue made clear by two major authors Teece and Porter suggests that “competitive advantage is at the core of a companies success. Yet how this advantage is achieve or maintained is where these two authors differ. We focus…

    • 2381 Words
    • 10 Pages
    Best Essays
  • Satisfactory Essays

    Core capabilities occurs when knowledge, skills underlies a company ability to become a leader with providing a range of goods and services. What I would consider my core capabilities are nursing, long-term care, acute care, and finance. The capabilities that I have skills and knowledge on are finance, and long-term care, meanwhile, what I would like to develop are health administration. Meaning understanding how to run a hospital or a long term care facility. Health administration, touch base…

    • 149 Words
    • 1 Page
    Satisfactory Essays
  • Good Essays

    1. Core Capabilities Model : Banks that are equipped with a good grasp of the e-banking phenomenon will be more able to make informed decisions on how to transform them into e-banks and to exploit the e-banking to survive in the new economy. Given the e-banking is a financial innovation (Liao and Cheung, 2003) [9], the change may render the organizational capabilities of the traditional banks obsolete. From the resource-based view (Mahoney and Pandian, 1992) [10], in such a context, the banks must…

    • 849 Words
    • 4 Pages
    Good Essays