Dynamic Capabilities Research Research Articles

Making sense of dynamic capabilities in international firms: Review, analysis, integration, and extension

In this work we review and analyze recent research in the international business field, with the purpose of clarifying, consolidating, and extending the constructs related to dynamic capabilities. We begin with an overview of dynamic capabilities research in the international context, noting unclear terminology, and unanswered questions concerning the international dimensions and the dynamism of capabilities. A systematic review follows, including 98 articles from 16 leading journals. Our analysis of these articles, produced a classification of 12 dynamic capabilities in international contexts—among which, we identify six “meta dynamic capabilities” and six “strategic dynamic capabilities.” To analyze and explain these constructs, we extract important conclusions from the relevant research about each dynamic capability, including examples from leading international firms. The integration and extension discussions further explore the meta and strategic dynamic capabilities along with implications for practice and policy. This work concludes with suggestions for future research, including foci on important methodological issues, from which a set of research questions are derived that link relevant contextual measures to the various dynamic capabilities.

Business ties, adaptive capability and technological turbulence: implications for SMEs’ performance in Turkey

PurposeBased on the dynamic capability theory, the purpose of this study is to examine the mediating role of the adaptive capability of small- and medium-sized enterprises (SMEs) on the relationship between business ties and firm performance. This study also investigates the moderating role of technological turbulence in those relationships.Design/methodology/approachData were collected from 1,265 SME managers in Turkey. Partial least squares analysis, a variance-based structural equation modelling, was applied to examine a mediated moderation model.FindingsThe results support the proposed framework illustrating that business ties are positively related to adaptive capability and firm performance. Moreover, adaptive capability mediates the relationship between business ties and firm performance. The results also indicate that the indirect effect of business ties on firm performance through adaptive capability was moderated by technological turbulence.Practical implicationsSMEs in emerging economies need to enhance their business ties and invest in their adaptive capabilities to increase their performances. This relation becomes more strategic under technologically turbulent environments.Originality/valueBy introducing empirical data from the Turkish emerging context, this paper contributes to our understanding of how SMEs’ relational networks contribute to firm performance. From the dynamic capability perspective, it shows how SMEs use their adaptive capabilities to environmental challenges. It also fills an important gap by showing that environmental uncertainties (specifically technological turbulence) moderate the adaptive capability’s mediating impact on the relationship between business ties and firm performance. The results also provide potential future directions for dynamic capabilities research in emerging contexts.

Capability matching between suppliers and customers in solution co-creation: a process-based model

PurposeThe purpose of this study is to examine supplier–customer capabilities in solution co-creation and how they are matched from a relational process perspective.Design/methodology/approachUsing a qualitative approach, the authors identified 20 sets of supplier–customer capability matches by conducting in-depth interviews with 34 matched informants and retrieving suppliers’ archival data (project documents and success stories).FindingsThe authors identified 20 capability matching sets (21 supplier and 23 customer capabilities) and developed a process-based model of bilateral capabilities that match at the organizational level in solution co-creation. The authors reveal their match forms (complementarity and compatibility) and offer suggestions for future research.Research limitations/implicationsThis paper is qualitative; quantitative studies are required for testing and extending the initial conclusions.Practical implicationsThis study guides the supplier and customer to cultivate different capabilities at different stages of solution co-creation and alerts them to the importance of capability complementarity and compatibility.Originality/valueTo the best of the authors’ knowledge, this study is the first to introduce the bilateral perspective into dynamic capability research in the context of solution co-creation. The authors discuss the abilities the supplier and customer must possess at different stages and how they match dynamically. The analysis extends the research on solution-specific capabilities and dynamic matching, offering useful implications for solution co-creation in practice.

Accounting going green: The move toward environmental sustainability in Vietnamese manufacturing firms

AbstractThis study investigates how environmental management accounting (EMA) usage mediates the impact of green dynamic capabilities on environmental performance. Furthermore, the moderating effects of green mindfulness on the relationship between green dynamic capabilities and EMA usage are investigated. The proposed model and its hypotheses are evaluated using partial least squares structural equation modeling (PLS‐SEM) with survey data from 394 large Vietnamese manufacturing firms. The study's findings are as follows: (1) green dynamic capabilities positively affect EMA usage, which, in turn, affects environmental performance; (2) when green mindfulness is strong, the effect of green dynamic capabilities on EMA usage is amplified. These findings demonstrate how the interaction between green dynamic capabilities and green mindfulness can contribute to the success of manufacturing firms that use EMA systems in emerging markets. Additionally, the current study elucidates the mechanism by which green dynamic capabilities influence EMA usage, and it aims to contribute to green dynamic capabilities research in accounting by introducing green mindfulness as a boundary condition.

Realizing dynamic capabilities and organizational knowledge in effective innovations: the capabilities typological map

PurposeThis paper aims to shed light on the mechanisms that connect dynamic capabilities and organizational knowledge in the innovative process to offer a new theoretical and practical solution considering the microfoundations of knowledge management strategies.Design/methodology/approachThis research has emerged from an in-depth case study of an effective innovation (from just ethanol and sugar-production to an effective biomass plant). The study represents an “inductive inquiry,” useful to understand specific “organizational mechanisms” of innovation, where the main data came from in-depth interviews with 18 key actors. It proved to help search the development of a specific biomass plant, designed and implemented between 2000 and 2007 in a Brazilian ethanol and sugar-production large company, referred to here as “Energyplant.”FindingsThis solution provides a new perspective based on the idea that dynamic capabilities are context-dependent and presents an original typological map that shows and materializes dynamic capabilities as teams of human-based resources. Managerial implications can be drawn from the capabilities typological map highlighting that, although identical dynamic capabilities are not required to change different firms, idiosyncratic dynamic capabilities perform universal knowledge functions that can be mapped, contributing to the planning of a specific innovation.Originality/valueWhile the dynamic capabilities research has been seen as one of the most vibrant topics in strategic management, scholars have recently stressed that dynamic capabilities continue to be underrated because the knowledge mechanisms that lead to effective innovations have not been adequately explored. The visual mapping is then applied to solve the reviewed theoretical problems, being also suggested to firms interested in change and adapting their capabilities to the requirements of the business environment.

CONTINUOUS BUSINESS MODEL INNOVATION AND DYNAMIC CAPABILITIES: THE CASE OF CEWE

Continuously innovating business models is necessary to leverage technological progress but remains a complex challenge for firms. Dynamic capabilities explain how organisations ensure long-term success by continuously transforming. Still, how continuous business model innovation unfolds and how dynamic capabilities might support remains understudied. Therefore, we use a 27-year old longitudinal case study of CEWE. CEWE transformed from an analog B2B2C business to a digital B2C and B2B brand in the photo industry. We derive a process model on continuous business model innovation, which explains how modular business model innovation builds dynamic capabilities and how architectural business model innovation utilises them. We enrich business model innovation and dynamic capabilities research by demonstrating how both enable and build on each other. For practice, we show explicit dynamic capabilities and routines to manifest them that guide firms to successfully navigate their business model innovation journey.

Dynamic Capabilities: Capabilities to Terminate

This symposium aims to move dynamic capabilities research forward by highlighting the nascent yet growing body of research on termination capability. Dynamic capabilities is one of the most influential streams of research in the field of strategic management in the past three decades. The growing but diffuse body of work on termination capabilities spans disparate titles such as exits, divestitures, failures, redeployment, terminations, and abandonments. We bring together five researchers whose work highlights (1) antecedents of firm termination capabilities and (2) their importance to firm performance (3) in a variety of theoretical empirical contexts, spanning VC investments, acquisition (dis)synergies, private equity firms in markets for corporate assets, and managerial prosocial preferences that impede layoffs.

New perspectives for dynamic capabilities in meeting needs of startups’ survival

PurposeThe purpose of this study is to analyze the systematic relationships among dynamic capabilities in startups’ survival.Design/methodology/approachThis study is based on a systematic literature review on dynamic capabilities related to startups’ survival, following the content analysis approach.FindingsThis study presents four different perspectives of analysis about dynamic capabilities from resources exchange and business factors that meet needs of startups' survival. It also points out new area for future research in this field. In doing so, this study differentiates itself by its approach not limiting dynamic capabilities research and enriching entrepreneurs' capability theory.Practical implicationsBy indicating an evolution of dynamic capabilities theory among tangible and intangible resources exchange in a more favorable adaptation to startups growth, this study boosters and contributes to the society, economy in general and to the science of business management in various perspectives such as overcoming cognitive barriers, entrepreneur’s commitment, innovation capabilities and knowledge capacity of startups.Originality/valueThis study amplifies dynamic capabilities vision in startups’ survival as one of the main sources for growth in this type of organizations. It also develops a deeper understanding about new avenues for dynamic capabilities theory among tangible and intangible resources exchange.

A Bibliometric Review on Dynamic Capability

Dynamic capability is an organization’s ability to integrate, build, and rearrange its internal and external competencies to face the rapidly changing environment. The objectives of dynamic capabilities consist of (1) the capacity to sense and form opportunities and threats (sensing); (2) capacity to seize existing opportunities (seizing); and (3) the capacity to maintain competitiveness through upgrading, merging, protecting, and reconfiguring business assets, both tangible and intangible. This study aims to determine the development of dynamic capability research trends published by leading Scopus-based journals. The data analyzed consisted of 1194 indexed research publications from 2012 until 2021. The data is then processed and analyzed using the VoS viewer application to determine the bibliometric map of dynamic capability research development. There are several definitions of dynamic capability and implications for the firm environment. Keywords: dynamic capability, bibliometric, Vos viewer, business environment, scientometric

How do incumbent firms innovate their business models for the circular economy? Identifying micro‐foundations of dynamic capabilities

AbstractThe circular economy is promoted as a contributor to sustainable development; however, the process of circular business model innovation remains under‐explored to date, hindering its implementation. Dynamic capabilities research provides a theoretical perspective to explore how incumbent firms can innovate in rapidly changing environments. An abductive qualitative research is done through an exploratory multiple case study on 10 incumbents that implemented a circular business model innovation. We identify 26 practices, aggregated in 12 micro‐foundations of the dynamic capabilities of sensing, seizing, and reconfiguring. By integrating the few empirical studies characterizing dynamic capabilities for sustainability‐oriented business model innovation, we offer a comprehensive framework of 33 practices. This study proposes that the most relevant practices for circular business model innovation processes are adopting a lifecycle perspective, employing sustainability‐oriented instruments, ideating sustainable value propositions, developing a sustainability strategy and culture, and engaging and coordinating stakeholders in the business ecosystem. We also suggest seven particularly relevant practices for long‐term business model transformations (e.g., top management commitment), four for innovations focused on short and medium loops of the circular economy (e.g., early customer engagement), and four for long loops (e.g., business ecosystem coordination). This study corroborates and expands recent research on dynamic capabilities for sustainability‐oriented innovation and provides practitioners with a set of 33 skills, processes, procedures, and activities to be prioritized to successfully innovate their business models for the circular economy.

A Dynamic Capabilities-Based Research Model for Innovation in Independent Restaurants

The purpose of the study is to contribute to the existing literature by reviewing empirical studies conducted in the restaurant industry on innovation to develop a dynamic capabilities-based research model for independent restaurants which can be tested by future scholars in the restaurants industry. The review covered innovation models that have been used and tested in restaurants; types of innovation; dynamic capabilities as an antecedent for innovation; the mediating role of human capital between dynamic capabilities and innovation; and the relationship between innovation and performance. The results of the study revealed that innovation activities described in the literature can be categorised into the dynamic capabilities components of sensing, learning, integrating, and co-ordinating capabilities thus supporting the proposed dynamic capabilities research model. The model, therefore, provides a comprehensive framework for investigating innovation activities in independent restaurants.

Dynamizing human resources: An integrative review of SHRM and dynamic capabilities research

Human resource management (HRM) systems have been extensively analyzed in academic research yet limited attention has been paid to the role of HRM dynamic capabilities (DC) and their impact on resources and practices, employee well-being and firm performance. Our study bridges this gap by defining a new categorization of HRM DC based on their ultimate aims: building knowledge, advancing social integration and developing reconfiguration-enhancing mechanisms. In parallel, we offer an integrative framework to shed light on how strategic human resource management (SHRM) can accelerate HRM DC development. Through this conceptual process model and typology of capabilities, we deepen the discussion around the core components of HRM systems, HRM DC, and their effects on resources and practices, employee well-being and performance. In practical terms, HRM DC represent a promising driver of sustainable long-term organizational growth by enabling firms to boost their strategic agility and capacity to navigate in the presence of environmental dynamism.

IDENTIFYING START-UP PARTNERS: WHICH SEARCH PRACTICES AND COMBINATION STRATEGIES ARE EFFECTIVE?

Start-ups are an important source of novel knowledge and product ideas for incumbents. We investigate which search strategies are positively related to the successful search for start-ups. We identify search instruments and their various uses: intensive or broad; stand-alone or combinatory. Finding 11 search practices in the literature, we evaluate how these practices were used by 97 respondents from a cross-industry and cross-national sample. Our results show that searching broadly and intensively is positively related to a successful search for start-ups and to firms’ radical innovation capability. Specific tools that are positively related to search success are online contacts, desk research, external scouting partners, and start-up pitch events. Decision tree analysis provides effective combinations of search practices that innovation managers and purchasing managers can use. Employing these search practice combinations, we make incumbents aware of the routines used in distant knowledge search. These practices are dynamic capabilities that help them to remain successful in high-velocity markets. In identifying these search practices, we contribute to the literature on innovation routines and dynamic capability research.

A Strategic Choice Model of Dynamic Capabilities Development

The positive link between dynamic capabilities and firm performance is well understood. Given this link, recent research has highlighted the practical and theoretical importance of understanding how dynamic capabilities are developed. However, the evolutionary learning assumptions that underlie much dynamic capabilities research leave little room to explore the antecedents of dynamic capabilities development in terms of the reasoned and intentional actions of managers, i.e., their strategic choices. Consequently, it is unclear how a strategic choice view should approach the development of routines that constitute dynamic capabilities given a prior focus on selection pressure over behavioral variation. To address these concerns, I propose a strategic choice model to explain how managers can contribute to the development of dynamic capabilities. By drawing on the resource-based view, the knowledge-based view, and institutional theory, I surface the creation of “learning spaces” as a key moderator that explains how managers may take steps to develop dynamic capabilities for a firm facing conditions of increasing environmental dynamism. This article contributes to the dynamic capabilities literature by answering recent calls to explain how dynamic capabilities are developed, to further elaborate assumptions about managerial agency, and to integrate new and relevant insights from institutional theory.

Do All Roads Lead to Innovativeness? A Study of Public Sector Organizations’ Innovation Capabilities

Although much has been written about public sector innovation in the last two decades, we still do not fully understand how public sector organizations become innovative. Therefore, this study inductively explored how four Norwegian municipalities developed innovation capabilities. I found that public sector organizations develop two forms of innovation capability in a path-dependent manner: low-routinized innovation capability and highly routinized innovation capability. In the former, dynamic managerial capabilities in the form of individuals’ entrepreneurial and leadership skills comprise the source of innovation capability. In contrast, in the latter, innovation capability emerges from dynamic organizational capabilities, that is, a set of innovation-stimulating routines, processes, tools, and structures. Notably, I found that regardless of the form of innovation capability, both spur the continuous development and implementation of various radical and incremental public sector innovations. Based on these findings, this study offers several contributions to the literature on public sector innovation and to the dynamic capabilities research agenda.

Paradoxical nature of dynamic capabilities research: a content analysis of literature

PurposeThe purpose of the current study is to identify the nature, scope and locus of and to systematize, the conceptual contradictions existing in dynamic capabilities research.Design/methodology/approachThis paper employs a content analysis literature review of 86 papers on dynamic capabilities published between 1997 and 2019, using two databases – EBSCO and Web of Science/Knowledge databases. To structure the review, Smith and Lewis's (2011) categorization of organizational tensions is adopted.FindingsFirst, the findings of this study suggest that DCs not only are shaped by a tension between efficiency and flexibility but also are built upon a large number of contradictory aspects, represented by organizing, performing, belonging and learning paradoxes. Second, the analysis identifies defensive and active responses to these tensions, with the former prevailing in the dynamic capabilities view literature. Both kinds of responses may facilitate or hinder organizational change. Third, it was found that while the literature has focused predominantly on organizing and learning paradoxes, the linkage between these categories remains under-researched.Originality/valueThis study makes three contributions. First, it identifies the scope (i.e. number), locus (analytical level) and nature (paradox categories and sub-categories) of DC-related paradoxes and responses to paradoxical tensions. Second, it shows that the nature and locus of conceptual contradictions are more complex than conceptualized in prior studies, going beyond the contingency and ambidexterity argument of how to deal with DC-related paradoxes. Third, it seeks to extend Di Stefano et al.'s (2014) proposition of integrating paradoxical views on different DC-related aspects. The idea of “audio console” introduced in this study highlights the interrelation of paradoxes between the categories and across analytical levels.

Active Slack, Balanced Capability Portfolios, and Firm Performance

Leveraging previous dynamic capabilities research, we investigate the unique role that active slack—recoverable R&D and inventories—may play for the performance of firms developing capability portfolios to renew and thrive in high-velocity environments. We see balanced capability portfolios as firms’ efforts to develop sensing and seizing capabilities simultaneously within or across internal and external modes of organization. For a sample of software firms, our findings reveal that in high-velocity environments, active slack has a direct positive effect on firm performance and a positive moderating effect for firms maintaining balanced capability portfolios within either internal or external modes. However, for firms maintaining balanced capability portfolios across internal and external modes, active slack has a negative moderating effect. Our findings advance the dynamic capabilities perspective and inform scholars and practitioners on the importance of active slack in high-velocity environments.

Clarifying the boundary conditions of value creation within dynamic capabilities framework: a grafting approach

This study extends dynamic capabilities research by examining the underlying and fundamental concepts of capabilities, resource allocation, fungibility, and environmental change with respect to value creation and appropriation (VCA). Scholars generally assume that VCA depends on the amount of resources allocated to generate future capabilities. We diverge from this ability-performance tautology and instead ground dynamic capabilities in a resource allocation framework. By introducing two boundary conditions, we suggest that environmental change and fungibility between current and dynamic capabilities determine whether resource allocation leads to VCA. We believe that our findings not only represent a fruitful path for future research by strategy and organization scholars, but also provide an important contribution to our knowledge of managing resources in dynamic environments to create future capabilities.

Digital transforming capability and performance: a microfoundational perspective

PurposeDrawing on the literature on dynamic capabilities and digital transformation, this paper conceptualises and investigates the relevant antecedents of an essential capability for digital transformation – the digital transforming capability – and its effect on the competitive advantage of firms.Design/methodology/approachA framework with individual and organisational microfoundations of the digital transforming capability is proposed based on previous research. The digital transforming capability is conceptualised as a second-order construct. The model is tested using data from a broad spectrum of large US companies. Structural equation modelling (SEM) is applied to test the proposed framework.FindingsThe study identifies three main microfoundations that, when combined, build a digital transforming capability (digital-savvy skills, digital intensity and context for action and interaction); in addition, the study tests the relationship between digital transforming capability and firm performance. The results validate the proposed theoretical framework. In addition to proposing relevant microfoundations of the digital transforming capability, we advance knowledge on the performance effects of those microfoundations.Originality/valueThe paper contributes to advancing the understanding of the digital transformation phenomenon by revealing the role of the primary components underlying the digital transforming capability. Yet the mechanisms by which the micro-level aspects are important for digital transformation and organisational outcomes are only suggested by anecdotal evidence. The paper also contributes to ongoing calls for further investigation to extend the understanding of the microfoundations of dynamic capabilities. Finally, by drawing on archival data, this study also contributes to calls to broaden the toolkit used in dynamic capabilities research.

Reconsidering ordinary and dynamic capabilities in strategic change

Dynamic capabilities research explains the ability of firms to respond to dynamic environments by reconfiguring inert and insufficiently flexible ordinary capabilities. However, more recent research ascribes the routines that constitute ordinary capabilities the ability to evolve endogenously. This study aims to develop dynamic capability research by increasing our understanding of the relations between and the roles played by ordinary and dynamic capabilities in producing purposeful responses to environmental dynamism. Drawing on longitudinal, qualitative data, we show how ordinary capabilities make important contributions to organizational responses to dynamic environments. Our findings pose challenges to key assumptions of extant dynamic capabilities research and allow us to explicate new roles for ordinary and dynamic capabilities, thus advancing the understanding of the relation between dynamic and ordinary capabilities and advancing understanding of one of the central issues in dynamic capabilities research: firms’ capacity to respond to changing environments.