Dynamic Capabilities of Multinational Enterprises: The Dominant Logics Behind Sensing, Seizing, and Transforming Matter!

Abstract

The dynamic capabilities approach explains how firms create and sustain competitive advantages in dynamic environments if they exhibit technical and evolutionary fitness. Multinational enterprises (MNEs) are not only exposed to industry dynamism, but also to dynamism in the different country environments in which they operate. Understanding the dynamic capabilities of MNEs thus requires analyzing not only the firm dimension, but also the country dimension and firm–country interactions of international business. Building on the analytical disaggregation of dynamic capabilities into: (1) sensing opportunities (or threats), (2) seizing (or neutralizing) them via expedient investments, and (3) transforming the firm and its resources and capabilities accordingly, we conceptualize the relationships between the dominant logics behind MNEs’ sensing, seizing, and transforming and evolutionary fitness. First, we propose that a dominant logic behind sensing, based on an application of resource-based view thinking to the international business context (which we develop to separately explain the three component parts of MNEs’ competitive advantages, i.e., non-location bound firm-specific advantages, country-specific advantages, and location bound firm-specific advantages), positively moderates the effect of sensing processes and routines on evolutionary fitness. Second, we propose that a dominant logic behind seizing, based on internalization theory thinking, positively moderates the effect of seizing processes and routines on evolutionary fitness. Third, we propose that a dominant logic behind transforming, based on a broad agency perspective extended to the international business context, positively moderates the effect of transforming processes and routines on evolutionary fitness.