Revisiting the role of the environment in the capabilities–financial performance relationship: A meta‐analysis

Within the capabilities‐based view of the firm, there is debate about the relative importance of ordinary and dynamic capabilities for firm performance and about the extent to which their performance effects are contingent on environmental conditions. We meta‐analyze 115 studies to investigate the relationship between both ordinary and dynamic capabilities and the financial performance of firms in relatively stable versus changing environments. The results suggest that the performance effects of both types of capabilities are positive and similar in magnitude. Environmental dynamism reinforces the effects of both ordinary and dynamic capabilities. Furthermore, the two types of capabilities are closely associated. Our findings provide support for a moderate capabilities‐based view of the firm, rather than one that considers dynamic capabilities as superior to ordinary ones. Copyright © 2015 John Wiley & Sons, Ltd.     

On the contingent value of dynamic capabilities for competitive advantage: The nonlinear moderating effect of environmental dynamism

This article suggests that dynamic capabilities can give the firm competitive advantage, but this effect is contingent on the level of dynamism of the firm's external environment. A nonlinear, inverse U‐shaped moderation is proposed, implying that the relationship between dynamic capabilities and competitive advantage is strongest under intermediate levels of dynamism but comparatively weaker when dynamism is low or high. This proposition is tested using data on alliance management capability and new product development capability, two specific dynamic capabilities widely recognized in prior research. Results based on longitudinal key informant data from 279 firms support the account that these dynamic capabilities are more strongly associated with competitive advantage in moderately dynamic than in stable or highly dynamic environments. Copyright © 2013 John Wiley & Sons, Ltd.     

Managerial cognitive capabilities and the microfoundations of dynamic capabilities

The microfoundations of dynamic capabilities have assumed greater importance in the search for factors that facilitate strategic change. Here, we focus on microfoundations at the level of the individual manager. We introduce the concept of “managerial cognitive capability,” which highlights the fact that capabilities involve the capacity to perform not only physical but also mental activities. We identify specific types of cognitive capabilities that are likely to underpin dynamic managerial capabilities for sensing, seizing, and reconfiguring, and explain their potential impact on strategic change of organizations. In addition, we discuss how heterogeneity of these cognitive capabilities may produce heterogeneity of dynamic managerial capabilities among top executives, which may contribute to differential performance of organizations under conditions of change. Finally, we propose possible directions for future research. Copyright © 2014 John Wiley & Sons, Ltd.     

Dynamic managerial capabilities: Configuration and orchestration of top executives' capabilities and the firm's dominant logic

This paper contributes to the understanding of the executive team dynamic managerial capabilities by developing theory about the interplay between the firm's dominant logic and dynamic managerial capabilities (including managerial human capital, social capital, and cognition). We underscore the criticality of the two key CEO‐level functions: configuration and orchestration of senior executive team dynamic capabilities. We develop theory on how these functions create and sculpt the management team's absorptive capacity, which in turn shapes the team's adaptive capacity. We present theory about the distributed nature of efforts for organizational renewal where CEO's dynamic managerial capabilities in concerto with senior executive managerial capabilities will drive top management's ability to revitalize the firm's dominant logic and to achieve evolutionary fit. Copyright © 2012 John Wiley & Sons, Ltd.     

The role of cocreation and dynamic capabilities in service provision and performance: A configurational study

The success of a professional service firm (PSF) relies on its capabilities for leveraging relationships with clients – i.e., cocreation capabilities (CCs) – and adapting to changing environments – i.e., dynamic capabilities (DCs). Previous research shows that the interaction of these two organizational capabilities and the multidimensional configuration of DCs. However, little is known about how CCs and DCs are jointly configured within PSFs and how trade-offs between these distinct capabilities relate to service provision and performance across different firms. This study explores the path dependent nature of higher- and lower- order capabilities and uses data from 279 marketing advisory firms to investigate how different configurations of higher-order CCs and DCs are associated with lower-order service provision capabilities (SPCs) and similar or different performance. We find that CCs can substitute for DCs, and that DCs and CCs can compensate for SPCs in achieving higher levels of customer-based performance. However, the same does not apply for financial performance in which CCs do not appear to overcome deficiencies in DCs and SPCs. Also, firms can have similar SPCs and experience similar financial performance while emphasizing the use of either DCs or CCs; suggesting DCs and CCs may substitute for each other.     

Enlightening the dynamic capabilities of design thinking in fostering digital transformation

Digital transformation describes the deep-seated changes in organizational activities, processes, and capabilities induced by the advent of digital technologies. Digital transformation requires sensing, seizing, and reconfiguring the digital technological challenges into opportunities. Academic literature acknowledges the central role of design as a driver of innovation. Furthermore, recent research discloses the value that design, especially design thinking, can have in leading digital transformations. In this understanding, design thinking has been proven to be an approach based on dynamic capabilities. What seems to lack in the current understanding is how the dynamic capabilities of design thinking can facilitate digital transformation. Thus, the paper aims to shed light on how dynamic capabilities of design thinking foster discovering the opportunities digital technologies provide to enact the transformation. This paper investigates four different cases of consulting projects where the adoption of design thinking dynamic capabilities enhance the value of digital technologies towards a more human centric digital transformation. By being a business-to-business market, the consulting environment might inform readers how design thinking dynamic capabilities are salient for digital transformation. Examining them, the paper proposes five design thinking dynamic capabilities that managers should cultivate: extending, debating, cropping, interpreting, and recombining. Concerning academic debate, the paper enriches the understanding of digital transformation by unshadowing the value that design thinking dynamic capabilities might play in it.     

Transforming entrepreneurial posture into a superior first product market position via dynamic capabilities and TMT prior start-up experience

First product commercialization is the first entrepreneurial act of new technology ventures. However, little is known about mechanisms that transform these firms' entrepreneurial posture into first product advantage. Building on the dynamic capability view of the firm, this study examines the role of capabilities exploitation (i.e., in the form of complementarity), top management team start-up experience, cross-functional collaboration and information and communication technology assets in driving entrepreneurial posture toward first product advantage. A multi-informant study of 137 B2B new technology ventures was undertaken. The results show that entrepreneurial posture can contribute to first product advantage indirectly by fostering R&D-marketing capability complementarity. Furthermore, our results indicate that the entrepreneurial posture - capabilities complementarity relationship is augmented when top management team possess prior start-up experience. Finally, our findings indicate that the benefits of R&D-marketing capability complementarity for first product advantage are contingent on the exploitation of cross-functional collaboration and ICT capabilities.     

Role of quality management capabilities in developing market-based organisational learning capabilities: Case study evidence from four Indian business process outsourcing firms

Business-to-business marketing literature acknowledges the value firms, including business process outsourcing firms, realise through their supplier networks. Such value realisation is often possible through a dynamic exchange of complementary organisational capabilities between a firm and its network partners. However, little is known about how outsourcing firms develop these capabilities and thus realise value. This paper addresses an unexplored theoretical gap of developing market-based organisational learning capabilities in business process outsourcing firms. Using a capabilities lens, this study assesses the impact of quality management capabilities in developing market-based organisational learning capability. Findings from a case study of four business process outsourcing firms in India suggest that effective knowledge transfer, diffusion and the development of market-based organisational learning capabilities are contingent upon the strength of a firm's quality management capabilities. Implications for theory and practice are discussed.     

How dynamic can organizational capabilities be? Towards a dual‐process model of capability dynamization

The recent discussion in the field of strategic management broadly favors the idea of dynamic capabilities in order to overcome potential rigidities of organizational capability building. The major question addressed in this paper is whether capabilities can actually be conceived as being in flux—and if so, to what extent and in which way? After briefly recapitulating the distinguishing features of organizational capabilities, path dependency, structural inertia, and commitment are identified as the main capability‐rigidity drivers causing a managerial dilemma. In the search for a resolution of this dilemma different approaches of dynamic capabilities are identified and discussed. The analysis shows that the approaches suffer from inherent conceptual contradictions: the dynamization runs the risk of dissolving the original idea and strength of organizational capability building. Ultimately, capabilities would lose the strategic power attributed to them in the resource‐based view. The last section of this paper therefore aims to develop an alternative approach, which aims at preserving the original merits of organizational capability and solving the rigidity issue not by integrating a dynamic dimension into the capability construct but rather by establishing a separate function (‘capability monitoring’). The suggestions mount up to a tier solution. Its logic builds on the dynamics of countervailing processes and second‐level observation. Copyright © 2007 John Wiley & Sons, Ltd.     

Reconfiguration,restructuring and firm performance: Dynamic capabilities and environmental dynamism

Research summary: Reorganization has been proposed as a key dynamic capability. This study compares the performance outcomes of two forms of reorganization, differing in their pervasiveness: organizational restructuring and organizational reconfiguration. Our dynamic panel data analysis of large U.S. corporations between 1985 and 2004 finds contrasting performance outcomes for these two forms of reorganization: in general, the more pervasive restructuring is associated with positive performance outcomes, while the more limited reconfiguration is associated with negative performance outcomes. However, outcomes vary by environment. Consistent with dynamic capabilities theory, we find evidence that in dynamic environments reconfiguration outcomes turn positive, while restructuring outcomes turn negative. We discuss implications for dynamic capabilities theory and managerial policy. Managerial summary: Firms need to reorganize in order to adapt to change. This study compares the financial performance consequences of two forms of reorganization: organizational restructurings and organizational reconfigurations. Restructurings involve fundamental change in organizational principles and are typically irregular; reconfigurations involve incremental change and are frequent. Examining a set of large U.S. corporations, we find these two forms of reorganization have contrasting financial consequences, depending on context. In the general case, fundamental restructurings have positive consequences, while incremental reconfigurations have negative consequences. However, this general result reverses in specifically dynamic environments, where reconfigurations are positive financially, while restructurings are negative. We conclude that the relative frequency of reconfigurations helps adaptation in dynamic environments. Managers should choose forms of reorganization according to the rate of environmental change. Copyright © 2016 John Wiley & Sons, Ltd.     

Why history matters: Micro-and macro-foundations in a corporate de alio spinoff

Much of the discussion surrounding dynamic capabilities has focused on mature and established corporate enterprises escaping core rigidities. Less understood is the role of dynamic capabilities in corporate spinoffs that represent a category of de alio (“from others”). These firms offer a novel context when investigating dynamic capabilities, as they are technically “new” firms yet demonstrate a level of establishment due to privileged access to resources from a corporate parent. We explore how incubation and attachment to a parent influences tacit and explicit transfer of resources and supports sensing and seizing in the early growth corporate de alio spinoff, promoting opportunities for transformation as the spinoff matures. Through an analysis of a longitudinal, empirical, illustrative case, we integrate Garnsey's Penrosean-inspired Theory of the Early Growth of the Firm with Teece's dynamic capabilities framework to illustrate how micro- and macro-foundations of dynamic capabilities unfold in a corporate de alio spinoff during incubation and following spinoff. This study builds an understanding of how corporate de alio spinoffs can more successfully navigate ambiguity by leveraging dynamic capabilities, the foundations of which emerge in a parent entity.     

Standards,innovation, and latecomer economic development: Conceptual issues and policy challenges

Little is known about the impact of standards on the economic development of countries which are latecomers to industrial manufacturing and innovation. Standardization is regarded primarily as a technical issue, and hence receives only limited high-level policy support.However, technical standards contribute at least as much as patents to economic growth. As a key mechanism for the diffusion of technological knowledge and due to the dominant leadership by advanced countries in patenting, technical standards have emerged in latecomer countries as an alternative to patenting. However, latecomer countries and their firms have a set of capabilities and constraints that are fundamentally different from that of advanced countries and firms. This paper argues that latecomer countries should adopt assessment criteria that are more fitted with latecomer contexts which emphasize learning effects and building dynamic capabilities. The paper discusses current issues that are essential in understanding the rise of Asian countries in standardization. We also examine the critical role that patents play for standardization and argue that “strategic patenting” to generate rents from de facto industry standards can stifle latecomer economic development.     

Heterogeneous social motives and interactions: The three predictable paths of capability development

Research summary : Limited attention has been paid to the crucial role of individuals' motivation and social interactions in capability development. Building on literature in social psychology and behavioral economics that links heterogeneity in individual social motives to social interactions, we explain how the variation, selection, and retention processes underlying a group's deliberate capability development are affected by the composition of the group in terms of individuals' social motives in interplay with the organizational‐level motivational levers designed by managers. Our multilevel theoretical model suggests that individual‐level heterogeneity leads to the development of capabilities along different paths. For practice, this implies that, according to the composition of the group in terms of social motives, capabilities are more or less technically and evolutionary adequate and a source of business process performance. Managerial summary :We propose that when a group of employees engages in developing one of the firm's capabilities, capability development will follow a different path according to what motivates most of the employees composing the group. We identify and discuss three paths. Two of these paths (convergence and congruence) can help improve business process performance in a stable environment, the third one (open‐ended) in a dynamic environment. Our work invites managers to not only think in terms of more or less capability development, but also in terms of capability development path(s): the path(s) in which groups in the firm are currently engaged and the one(s) that are desirable given the firm's objectives and the nature of the environment(s) the firm faces in deploying its business processes. © 2016 The Authors. Strategic Management Journal published by John Wiley & Sons, Ltd.     

Unravelling the internal and external drivers of digital servitization: A dynamic capabilities and contingency perspective on firm strategy

Despite the increased interest in using digital technologies for servitization purposes, little is known about what drives firms towards a digital servitization strategy. Using a dynamic capabilities lens, we look into the relationships between two organizational mechanisms – exploitation and exploration – and firms' orientation towards digitization, servitization and digital servitization. On top, we examine the influence of two environmental contingencies – technological turbulence and competitive intensity – as potential influencers of these relationships. We collected and analyzed data of 139 Belgian firms through hierarchical regressions. Exploitation and exploration are positively associated with digital servitization, but exploration trumps the effect of exploitation when firms do both. Technological turbulence is positively associated with digitization regardless of the firm's level of exploration or exploitation, and competitive intensity only relates positively with servitization when firms emphasize exploration. Theoretically, we contribute to the literature by unravelling the relationship between firms' dynamic capabilities and their environment. In order to fully understand firms' strategic transition towards digital servitization, both should be considered. As managerial implications, we suggest that firms pay close attention to adapting their strategy to fit an increasingly changing environment.     

The effect of distributors' relationship exploration on relationship quality under market uncertainty

While relationship exploration, or seeking alternative exchange partners, is a ubiquitous marketing channel strategy when facing a volatile marketing environment, how this strategy affects a firm's incumbent relationship is unclear. Drawing upon resource dependency theory and the dynamic capabilities perspective, we argue that a distributor's relationship exploration does not destruct but rather improves the existing relationship by enhancing the focal distributor's dynamic capabilities (e.g., absorptive capability and innovative capability) that are essential in volatile environments. However, the ultimate influence of this strategy via dynamic capabilities is contingent upon the careful alignment of dynamic capabilities with market conditions. Using a sample of electronic component distributors in China, this study confirms the role of dynamic capabilities as underlying mechanisms in the influence of relationship exploration on relationship quality. Moreover, we find that market uncertainty varies the effects of dynamic capabilities differentially; it strengthens the effect of absorptive capability, while it weakens that of innovative capability.     

A relational embeddedness perspective on dynamic capabilities: A grounded investigation of buyer-supplier routines

Our study extends the emerging inter-firm-level theorization of dynamic capabilities by articulating how firms can develop and adapt their resource bases through supplier relations. Specifically, we aim to explore how different embedded relational aspects function together or separately to induce various inter-firm routines that presumably underpin the buying firm’s dynamic capabilities. The research design is a multiple case study involving 34 buyer-supplier dyad-level innovation events across six product groups of three multinational buying firms in the Pharmaceuticals, Aerospace, and Fast-Moving Consumer Goods sectors. Our inductive analysis suggests that the social, cognitive, and physical aspects of relational embeddedness play roles, in a cumulatively sequential fashion, in inducing three distinctive routine types—unilateral, quasi-unilateral, and bilateral—in the buyer-supplier dyads that underpin the three clusters of dynamic capabilities—sensing, seizing, and transforming, respectively. Furthermore, our study identifies two contingencies that explain variances in the observations and inferences. We therefore investigate the ‘black box’ of dynamic capabilities in inter-firm contexts, elucidating the roles and association of relational embeddedness and patterned activities (routines) in these relationships.     

The role of incubators in overcoming technology ventures’ resource gaps at different development stages

Although incubation is considered important for overcoming resource challenges in technology ventures’ early life, there is a doubt about its relevance in later development stages, when the initial idea is commercialized and the venture tries to grow. Building on the resource‐based view of the firm and on a stage‐based perspective of venture development, this study argues that the resource gaps facing technology ventures differ between different development stages, and that the support provided by incubators therefore needs to be adapted to the venture’s development stage. We study the interaction between the iMinds incubator, located in Flanders, and eight technology ventures in its portfolio. In the Conception and Development stage, we observe resource gaps in terms of technical knowledge and access to end users, which the incubator addresses by offering direct technical support and access to its research and end user network. The subsequent Commercialization stage is dominated by business knowledge gaps, which the incubator amends through direct coaching and trainings. In the Growth stage, ventures typically lack the necessary team members, market players, and follow‐up financiers to grow their firm. The incubator addresses these resource gaps by providing access to its network. In all development stages, the incubator’s internal knowledge base, networking capabilities, and matching focus/selectivity are crucial in order for ventures to benefit from the incubator’s support. Our study suggests that these underlying capabilities can either be developed organically, or through the merger of different research institutes. Moreover, it points to the importance of local embeddedness for the geographical extension of these capabilities. These findings contribute to the literature on incubation and on venture development. They have important implications for policy makers, incubation managers, and entrepreneurs seeking incubation support.     

A dynamic capabilities-based framework of organizational sensemaking through combinative capabilities towards exploratory and exploitative product innovation in turbulent environments

This study develops a dynamic capabilities-based framework of organizational sensemaking through combinative capabilities towards exploratory and exploitative product innovation. Organizational sensemaking helps organizations develop cognitive maps of turbulent environments through its construction of shared interpretations of environmental changes. We argue, however, that successful exploratory and exploitative product innovation are not guaranteed by organizational sensemaking alone, but instead depend on how firms' capabilities synergistically combine and transform knowledge resources. Organizational sensemaking and combinative capabilities are together positioned as important dynamic capabilities. The dynamic capabilities-based framework is applied to explain why and how organizational sensemaking determining superior exploratory and exploitative product innovation in turbulent environments is realized by combinative capabilities. Furthermore, the paper examines the differential effects of combinative capabilities on the firm's exploratory versus exploitative product innovation. Firms can better understand how to leverage different type of combinative capabilities for optimal outcomes.     

In with the old,in with the new: capabilities,strategies, and performance among the Hollywood studios

An increased focus on turbulent environments has led to a growing interest among researchers in the concept of dynamic capabilities. In this study, we approach dynamic capabilities in a framework of two complementary processes. On one hand, firms can build upon existing capabilities in products and markets in which they have experienced recent success; on the other hand, they can also intentionally focus on other products and markets in which they seek to build capabilities to address their lack of recent success. We examine these two processes within project‐based industries and identify replication and renewal as two types of strategies that firms use to add a dynamic component to their capabilities. We also theorize that the success of each of these strategies is tied to differentiation from rivals, and to firm‐level resource availability and industry‐level demand characteristics. We test these propositions by focusing on the film genres that were offered by the Hollywood studios over a thirty‐year period. Copyright © 2009 John Wiley & Sons, Ltd.     

Toward a contingent resource‐based theory: the impact of information asymmetry on the value of capabilities in veterinary medicine

The paper investigates the contingencies which define valuable resources in professional medical services. We identify activities with credence, experience, and search qualities in medical service industries in general, and in veterinary practices more specifically. We propose that different capabilities are needed to deliver different services and test whether the contingent combination of capabilities for particular services is linked to the performance of veterinary practices. For example, we expect that practice capabilities which help to retain clients are necessary for the successful delivery of services with experience qualities. We find evidence of performance benefits of client retention in a sample of 193 veterinary practices. We also find that in markets where competition from a new form of entrant is especially intense, an independent veterinarian’s credence activities combine with its experience and search activities to jointly improve practice profitability. Since the new entrants’ resources are mainly effective in the delivery of services with search qualities, the practice capabilities of the independent veterinarians that allow them to offer services with credence and experience qualities can be seen as a type of isolating mechanism. Copyright © 1999 John Wiley & Sons, Ltd.