The Formation of Routines in New Ventures and the Relationship between Routines and Capabilities

Abstract

In recent years, the enterprise capability theory has become one of the focuses of entrepreneurship research. Meanwhile, scholars have also gradually begun to explore the formation of routines in new ventures. However, most scholars research at a single level of routines, so the conclusion is that due to the conflict between practices, scholars cannot have a dialogue under the same system. At the same time, the formation of routines in new ventures and the relationship between routines and capabilities have not been effectively revealed. Scholars’ studies mostly focus on the relationship between routines at a certain level and capabilities, and the mechanism of action between routines at all levels and capabilities is still unclear. Although scholars have done a lot of work about routines and enterprise capabilities respectively in recent decades, with a large number of research results about the characteristics, connotations, dimensions and related theories of routines emerging, research on the formation and evolution of routines and the relationship between routines and enterprise capabilities are obviously inadequate. The purpose of this paper is to define routines in new ventures and their formation on the one hand, and discriminate the relationship between routines and capabilities through the model of mechanisms on the other hand. After a systematic review of the latest literature at home and abroad, the conceptual paper draws on evidence from the hierarchy theory, the enterprise capability theory and the routine theory to explain the functional mechanisms between routines and capabilities in new ventures. In sum, the model of mechanisms between routines and capabilities in new ventures points out that a new venture firstly forms a single routine and then forms clusters of routines through bundling to clusters to form operational capabilities. When the environment changes, the enterprise forms dynamic capabilities to cope with changes by integrating its operational capabilities with resources and then modifies a single routine to make the routines updated. Firstly, this paper uses the hierarchy theory to explain the formation of routines in new ventures. Secondly, this paper improves the hierarchy theory of capabilities and routines in new ventures. Finally, by distinguishing the relationship between capabilities and routines, this paper answers the question of how dynamic capabilities improve operational capabilities from the perspective of mechanisms, and makes a clear distinction between dynamic capabilities and operational capabilities.