Building and Leveraging Dynamic Capabilities: Insights from Accelerated Innovation in China

Abstract

Plain language summaryThis article explores what we can learn from a set of Chinese companies who have successfully pursued a strategy of accelerated innovation about building and leveraging dynamic capabilities. We conclude that creating flexible organizational structures and processes is key. The resulting dynamic capabilities can help achieve sustainable competitive advantage by spawning a series of innovations that enable a company to ‘run faster’ than competitors. These capabilities depend, in part, on the perceptions and behaviors of the firm's staff. Almost without exception, however, they have their roots in characteristics of the local environment. Such dynamic capabilities will be difficult to transfer and deploy overseas. A firm's ability to sustain competitive advantage abroad, therefore, depends on choosing foreign markets that share similarities with the firm's home base.Technical summaryThe dynamic capabilities framework was developed in the context of markets characterized by rapid technological change. Globalization means that firms in many industries now need similar capabilities to achieve and sustain competitive advantage. But the nature of these capabilities, their antecedents, and how they can underpin sustainable competitive advantage are incompletely understood. This article draws on a set of case studies of successful Chinese innovators to examine these questions. The dynamic capabilities we observe are underpinned by a set of processes that are themselves dynamic and flexible, rather than fixed, repeatable routines. Their antecedents mostly lie in qualities of the local environment. Hence, they tend to be context dependent, with consequent limitations in their transferability and applicability to sustaining competitive advantage in foreign markets. Copyright © 2016 Strategic Management Society.