MNE dynamic capabilities in (un)related diversification

Abstract

While we know that dynamic capabilities (DCs) are important for multinational enterprises (MNEs), little is known about the multiple DCs they may exercise and how they configure the DCs to support their related or unrelated diversification activities. Our qualitative empirical case study findings illuminate how an MNE does so. We confirm that DCs rest on the ostensive microfoundations that encompass the three principal DC processes of sensing opportunities, seizing opportunities and transforming resources. Furthermore, we explicate their performative microfoundations. We reveal that for all the DCs, performative microfoundations of sensing include information gathering and strategic analysis. The performative microfoundations of seizing include a capacity to experiment, then formulating a course of actions. Finally, the microfoundations of transforming include resource structuring, then capability renewal (for unrelated diversification) or capability improvement (for related diversification), and capability implementation. While the process flow of ostensive microfoundations is uniform across DCs, the transforming process flow of performative microfoundations differs for related and unrelated diversification activities. Alongside evidencing the different exploitative/explorative learning and involvement of lower/top-level management associated with the DCs supporting related/unrelated diversification activities respectively, we foreground DCs' configurational nature and extend the IB DC literature on MNE diversification and DCs' microfoundations.