Product Sequencing: Coevolution of Knowledge, Capabilities, and Products

Abstract

Abstract Why are firms different? This is one of the fundamental questions in strategic management, because the sources of firm heterogeneity underlie competitive advantage (Rumelt et al. 1994). The resource-based view (Barney 1991, Peteraf 1993, Wernerfelt 1984) and knowledge management approaches (Grant 1996) suggest that capabilities and knowledge form the basis for differential firm performance. But how do successful firms get to the point where they have superior resources and knowledge, and how do firms maintain this superiority through time? Dynamic capabilities that enable firms to introduce new products and processes and adapt to changing market conditions play an important role (Teece et al. 1997, Helfat 1997). But exactly how do firms build and deploy capabilities? We provide a conceptual model that explains how organizations can successfully build and utilize knowledge and capabilities, over long time spans, in single and multiple product markets, for continuing competitive advantage. The model further highlights the importance of products, supported by vertical chains of complementary assets and activities, to the development and exploitation of capabilities and knowledge. That is, we bring the role of products back into the analysis of resources, capabilities, and knowledge.