Firm Capabilities Research Articles

Varieties of engagement: Japanese corporate leaders’ strategic relations with foreign shareholders and institutional change

PurposeApplying the concept of “entrepreneur managers” from dynamic capabilities theory to the question of how some Japanese managers develop and use their relationships with foreign investors, this article explores organizational contexts in which Japanese managers use foreign shareholders as resources to enhance firm capabilities in the global marketplace, deploy assets effectively and implement changes to traditional organizational customs. The article asks why and how some top managers implemented institutional changes and adopted customs that are common in the shareholder-based system while others did not.Design/methodology/approachWe conducted qualitative interviews with 11 inverstor relations (IR) managers of large, listed Japanese firms in Kyoto and Tokyo.FindingsFirst, by inviting a hedge fund partner and using their human capital and social capital, a Japanese CEO committed to strengthening his firm’s competencies in the global market and introduced changes that are common in the shareholder-based system. Second, a CEO with an MBA degree and exceptional communication skills in English and Japanese dedicated himself to executing much of the strategic advice suggested to him by foreign shareholders and altered some of his firm’s traditional Japanese management practices. Third, even though many Japanese firms welcomed and used foreign shareholders as advisors to help them streamline and/or acquire firm assets, their top leaders’ implementation of organizational changes was limited. Fourth, the top leaders of family-owned firms were reluctant to initiate dialogue with foreign investors.Originality/valueThis article adds some useful organizational context to existing scholarship on institutional theory by examining Japanese leaders’ strategic management in their relations with foreign investors. Using the concept of dynamic capabilities, it addresses the role of innovative strategic managers in firms’ institutional changes.

Developing customer analytics capability in firms of different ages: Examining the complementarity of outside-in and inside-out resources

Customer analytics capability remains underdeveloped among firms despite its potential for enhancing competitiveness. Previous research has predominantly focused on inside-out organizational factors as drivers of customer analytics capability. This paper examines the role of outside-in resource, the complementarity between outside-in and inside-out resources, and their boundary conditions. Specifically, we study how customer orientation culture (an outside-in resource) complements data-driven culture (an inside-out resource) in firms of different ages to drive customer analytics capability and subsequently, firm performance. Using survey data obtained from Canadian firms, we find that customer orientation is not only positively related to customer analytics capability but also reinforces the effect of data-driven culture. We further find that the conditional effect of customer orientation becomes stronger as firm age increases. In particular, among older firms, the impact of data-driven culture is greatest when customer orientation is high, but it becomes nonsignificant when customer orientation is low. We also link these relationships to firm performance using mediation and moderated mediation analyses. Overall, the results suggest that achieving customer analytics excellence and resultant competitive performance requires marketing to continuously act as customer champions and advocate data analytics efforts to ensure the firm embraces an outside-in orientation.

Market orientation, corporate governance, and organizational learning: the rise of Korean popular culture

ABSTRACT Investors and managers of firms producing cultural products have long confronted the problem of low success rates. This study proposes a model arguing that corporate governance, in addition rates organizational learning, improves market orientation, which in turn influences the performance of cultural products. To support our model, this study collects 607 music videos produced by South Korean and Taiwanese entertainment companies. We measure their market orientation via the simple market research technique of data mining and examine the degree to which the characteristics of firm products are consistent with the results of market research. We find that market orientation is positively related to product performance. We also find that both corporate governance and organizational learning improve market orientation. Building on past research that has exclusively conceptualized market orientation as firm capabilities that could be improved by organizational learning, this study further suggests that agency problems between investors and artist managers hinder firms’ market orientation, and could be mitigated by strong institutions in corporate governance.

Collaborative Capability and Competitiveness of Local Pharmaceutical Manufacturing Firms in Kenya

Collaborative Capability and Competitiveness of Local Pharmaceutical Manufacturing Firms in Kenya

Adapting to discontinuous technological change from the perspective of knowledge management: a case study from the lighting industry in Lin’an, China

PurposeThis study aims to answer the question of how incumbent firms cultivate dynamic capabilities through knowledge management so that they can efficiently adapt to the changing external environment.Design/methodology/approachThis study adopts a case study approach and collects data through interviews and secondary public information on the lighting industry and two lighting firms in Lin'an, China. It qualitatively examines the challenges and strategic recommendations for incumbent firms in the context of discontinuous technological change from a knowledge management perspective.FindingsIncumbent firms often face a variety of challenges when responding to discontinuous technological change. These challenges include identifying opportunities, overcoming path dependence and dealing with employee resistance to change. To overcome these difficulties, three strategies have been proposed to enhance the dynamic capabilities of incumbent firms through knowledge management: cross-border search helps firms improve their knowledge acquisition capabilities and better understand their environment to identify opportunities; building strategic leadership overcomes path dependence and improves knowledge integration capabilities; organizational learning deepens employees’ understanding of change and enhances organizational knowledge application capabilities.Research limitations/implicationsPrevious research attributes a firm's ability to cope with discontinuous technological change solely to its general resources, which weakens the importance of knowledge management in this context. This study emphasizes the importance of knowledge as a crucial strategic resource in developing the essential dynamic capabilities for incumbent firms to cope with discontinuous technological change.Practical implicationsThis study provides an in-depth analysis of incumbent firms' coping strategies in the new context of discontinuous technological change and further promotes cross-disciplinary research.Originality/valueThis study provides an in-depth analysis of coping strategies in the new context of discontinuous technological change, furthermore theoretically advancing the interdisciplinary research of firm transformation and knowledge management. Meanwhile, it is crucial to identify the preconditions for cultivating dynamic capabilities, especially from a knowledge-based view, which enhances the depth of knowledge management research.

Revealing the role of explainable AI: How does updating AI applications generate agility-driven performance?

This study examines the role of explainable AI in the relationship between updating a portfolio of AI applications and performance. Updating a portfolio of AI applications relates to a firm's dynamic capability to respond to the changes of the market. We propose a set of four hypotheses in which the impact of updating the portfolio of AI applications on firm performance is mediated by business process agility. Additionally, we suggest that building explainability into the portfolio of AI applications when firms update their portfolio acts as a moderator to generate greater agility, which in return improves overall firm performance. Data from a survey of IT executives were analyzed to validate our proposed hypotheses. The results from the survey were also evaluated by a qualitative focus group session. This research is a significant contribution to the emerging literature on dynamic capabilities as it presents and tests a theory regarding the influence of the firm capability to update the portfolio of AI applications on agility and firm performance and the role of explainable AI.

The double-edged sword effect of digital capability on green innovation: Evidence from Chinese listed industrial firms

This study investigates the impact of digital capability on green innovation and its moderating mechanism. The results show that a firm's digital capability has a significant inverted U-shaped effect on its green innovation, thereby confirming the existence of non-linear changes in the green innovation process. Moreover, organizational slack and executive education can moderate the relationship between digital capability and green innovation, with available slack, recoverable slack or executive education having a positive effect, and potential slack having a negative effect. Further study shows that digital capability of private firms, foreign firms or firms in the eastern region has a greater impact on green innovation than that of state-owned firms, local firms or firms in the central and western regions. Additionally, digital capability contributes to the economic value transformation of green innovation, but environmental performance improved by green innovation does not significantly depend on digital capability. Based on these findings, policy implications of improving green innovation are discussed.

Complementary effects of information systems strategic assets and enabling roles of information systems on innovation performance of banking organizations

AbstractBanking organizations improve innovation performance by recognizing rare strategic assets and efficient use of information systems. This study explored the role of information systems in enhancing internal operational effectiveness and leveraging firm capabilities for strategic positions. Using a mixed‐method design, 11 participants in six banking organizations in Ghana were interviewed to gather data. The results indicate IT contribution, organizational learning, and IS‐related human are the most significant attributes that positively impact innovation performance. Corroborating qualitative and experimental results identified new products, improved operational processes, improved product functionalities, and innovation strategy as the key innovation performance factors. While the information systems strategic assets have minimal effect, the enabling role of information systems has a moderate impact on innovation performance. In contrast to either information systems strategic assets or the enabling role of information systems alone, the results show their complimentary effect on innovation performance is considerably higher.

Digitalization in lean manufacturing firms: a cumulative capability development perspective

PurposeThe purpose of this paper is to examine the digitalization of operational processes and activities in lean manufacturing firms and explore the associated learning implications through the lens of cumulative capability theory.Design/methodology/approachAdopting a multiple-case design, we examine four cases of digitalization initiatives within lean manufacturing firms. We collected data through semi-structured interviews and direct observations during site visits.FindingsThe study uncovers the development of learning capabilities as a result of integrating lean and digitalization. We find that digitalization in lean manufacturing firms contributes to the development of both routinized and evolutionary learning capabilities in a cumulative fashion.Originality/valueThe study adds nuance to the limited theoretical understanding of the integration of lean and digitalization by showing how it cumulatively develops the learning capabilities of lean manufacturing firms. As such, the study supports the robustness of cumulative capability theory. We further contribute to research by offering empirical support for the cumulative nature of learning.

The impact of dynamic capabilities of platform firms on value co-creation - An empirical study based on chinese firms

This paper explores the mechanism of dynamic capabilities of platform firms on value co-creation in a complex environment. Based on previous studies, a theoretical model of the relationship between dynamic capabilities, indirect network effects and value co-creation is constructed, and data are collected by distributing questionnaires and empirically tested using structural equation modeling. The results show that the dynamic capability of platform enterprises positively affects the value co-creation of ecosystem, and the indirect network effect plays a mediating role between the dynamic capability of platform enterprises and value co-creation. Finally, relevant management recommendations are proposed based on the research results.

Telework as a dynamic capability of firms: A qualitative research and narratives

Unexpected and negative factors such as pandemics, crises, etc. have a profound effect on business environment and entail a paradigm shift in the classical concept of work schedule. The paper aims to explore the phenomenon of telework as a dynamic capability of firms to ensure business continuity in the face of all kinds of unpredictable events and delves into the factors behind telework applications that contribute to increasing the resilience of SMEs to chaotic business shifts. Dynamic capabilities theory constitutes the methodological basis of the study. For the purpose of the research, the qualitative method was used, which has a detailed and exploratory approach with inductive questions and enables a holistic picture of the phenomenon under investigation to be revealed. The multi-site case study design was preferred, and the data collected were analysed using content analysis. In July–August 2022, 13 semi-structured interviews were conducted with the owners, top and mid-level managers of SMEs operating in the service sector in Turkey. MAXQDA 2020 programme was used to analyse the data obtained. As a result of the research, the structure of the telework theme consisting of three dimensions (technological infrastructure, culture, and work attributes) and ten sub-dimensions (working order, trust, implementation history, business strategy, etc.) was discovered. For telework to be carried out healthily, firms should establish working order, work to be done, time spent by employees in front of the computer, etc., be more flexible and receptive to changes in work practices, create an appropriate culture and establish manager-employee trust.

Dynamic board capabilities: Developing board practices that impact corporate renewal and performance

A crucial requirement for firms to remain competitive is to consistently and simultaneously engage in exploratory and exploitative activities. The academic literature has broadly accepted that the development of dynamic capabilities (ie firms' abilities to create, reconfigure and improve resources and capabilities to fit their changing environments) are vital to meeting this competitive requirement. Research has predominately addressed these dynamic capabilities from a management perspective. Little attention has been paid to the influence of the board of directors on these firm capabilities even though boards hold the fiduciary responsibility for the corporation and its long-term viability. Even less has been written on how boards ought to organise themselves and develop their dynamic board capabilities to support and govern corporate renewal and performance effectively. This paper aims to start addressing this gap by using two related aims. First, a process framework for board behaviours is proposed that ensures, and supports, a systematic way of building and developing corporate-level dynamic capabilities. Then, evidence is presented and reviewed from a survey of two board member communities which supports the idea that board capabilities are essential for a firm's successful renewal and economic performance, and need to be improved in practice. This framework is closely aligned with well-established components identified by the management literature but differs in having the board as the unit of analysis. A crucial question and action agenda is proposed for boards eager to acquire and develop their dynamic capabilities.

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.

Unraveling the transformation: the three-wave time-lagged study on big data analytics, green innovation and their impact on economic and environmental performance in manufacturing SMEs

PurposeThe firms’ adoption and improvement of big data analytics capabilities to improve economic and environmental performance have recently increased. This makes it important to discover the underlying mechanism influencing the association between big data analytics (BDA) and economic and environmental performance, which is missing in the existing literature. The present study discovers the indirect effect of green innovation (GI) and the moderating role of corporate green image (CgI) on the impact of BDA capabilities, including big data management capability (MC) and big data talent capability (TC), on economic and environmental performance.Design/methodology/approachA time-lagged design was employed to collect data from 417 manufacturing firms, and study hypotheses were evaluated using Mplus.FindingsThe empirical outcomes indicate that both BDA capabilities of firms significantly influence green innovation (GI), which significantly mediates the relationship between BDA and economic and environmental performance. Our findings also revealed that CgI strengthened the effect of GI on economic and environmental performance. The empirical evidence provides important theoretical and practical repercussions for manufacturing SMEs and policymakers.Originality/valueThis study contributes to the literature on BDA by empirically exploring the effects of MC and TC on improving the EcP and EnP of manufacturing firms. It does so through the indirect impact of GIs and the moderating effect of CgI, thereby extending the Dynamic capabilities view (DCV) paradigm.

Towards innovation capability in retail services: managing the tensions of exploration and exploitation

ABSTRACT Retailing is said to be at a critical period where much higher demands are being placed on retail actors to develop their capability for explorative innovation for lasting competitive advantage. Developing innovation capabilities is a challenging pursuit, however, and is a topic that is under-researched in the retail context. This paper thus investigates tensions that emerge when retail firms pursue explorative innovation in an organisational context characterised by exploitation-oriented activity, and how these are managed through various organisational mechanisms. The findings from our multiple case study reveal how developing innovation capability in incumbent retail firms gives rise to complex tensions related to strategic intent, organisational culture and structure. These are perceived as organisational paradoxes and managed as such due to the need to balance these opposing poles, emphasising the need for balance instead of making an explicit choice. Retail incumbents establish differentiating mechanisms for innovation, complemented by various integrative mechanisms. The study shows that in order to enable explorative, radical innovation in retail firms, innovation work needs to be differentiated from that of ongoing operations, provided that integration is facilitated at operational and strategic levels. By focusing on incumbent retail firms using exploration-exploitation paradox as a theoretical lens, the study contributes with new perspectives on building innovation capability in this context. The paper gives evidence to how developing innovation capabilities lies in the management of these complex tensions as paradoxes using the combination of differentiation and integration mechanisms.

The anatomy of exporting wineries of Argentina

PurposeThis study aims to provide a detailed characterization of Argentinean exporting wineries using a new rich firm-level data set to understand how capabilities and business strategies differ among firms with different levels of involvement in the export market.Design/methodology/approachA survey was distributed among all wineries along all wine regions of Argentina; the 45-min questionnaire was answered by 230 wineries, a representative sample with a response rate of 26.3% of the total population of Argentinean wineries. The survey assessed the interaction between wineries’ dynamics and characteristics and their participation in export markets. In the comparative analysis, the results are presented by dividing the sample into four categories according to the export intensity of the wineries.FindingsHigh-intensity exporting wineries in Argentina differ from other Argentinean wineries in several dimensions. In particular, the most internationalized Argentinean wineries are the most endowed with higher capabilities; they follow a specific business model emphasizing product differentiation, quality upgrading, brand building and the development of distribution channels. Exporting wineries from Argentina adopt business practices that differ from those that prevail among wineries that only target the domestic market. They have developed firm capabilities such as human capital and technology to play a critical role in quality upgrading for their participation in global wine markets.Originality/valueTo the best of the authors’ knowledge, this paper is the first to study the Argentinean exporting wineries using a firm-level sizeable representative sample.

Supplier selection among manufacturing companies based on their MSME partners’ supply chain finance adoption capability using BWM and VIKOR

PurposeThe purpose of this paper is to identify and prioritise supply chain finance (SCF) adoption enablers and develop a novel comprehensive framework to select supplier firms based on their SCF adoption capability.Design/methodology/approachThe study deploys a three-phase method to identify and prioritise SCF adoption enablers, followed by developing a model to select suppliers according to their SCF adoption capability. An extensive literature review, followed by a Delphi approach-based expert interview, has been used to finalise the enablers. Using the Best Worst Method and the VIsekriterijumsko KOmpromisno Rangiranje technique, a supplier selection model has been developed in the context of a case company.FindingsThe financial health and technological advancement variables received the top priority, followed by collaborative efficiency, whereas the human resources and organisational variables received the slightest significance. A supplier selection framework has also been developed by using the adoption capability of these factors by the supplier partners. In this study’s model, Supplier 4 exhibited better SCF adoption capability and received the top priority.Research limitations/implicationsManufacturing supply chains in a developing country are the scope of the current study. Extensive future studies are required to derive a global consensus.Practical implicationsThe proposed framework of this study can be used to select supplier firms based on their SCF adoption capability. Policymakers can emphasise the most critical enablers of SCF adoption to assist small supplier firms to be a part of the advanced global supply chains.Originality/valueThe current study established a novel comprehensive framework for supplier selection based on the Supply Chain Finance adoption capability of MSME supplier firms.

Do investors care about auditor assignments? Evidence from last-minute changes to signing auditors

Against the background of China’s strengthening of finance and accounting supervision, this study examines the practice among listed companies of changing signing auditors at the last minute and explores whether Chinese investors can capture this information in a timely manner. We find that China’s capital market responds significantly negatively to these last-minute changes, implying that investors perceive a potential negative impact of this behavior. Cross-sectional analyses suggest that the characteristics of the change event, recent corporate events, and accounting firm capability significantly affect the stock price response. Furthermore, in terms of the individual characteristics of signing auditors, external investors appear to comprehensively consider busyness level, industry experience, and the timing of the change to determine the causes and effects of the auditor change and make different market reactions accordingly. In addition, consistent with investor perceptions, we find that last-minute changes significantly impair the quality of financial statements, indicating that external investors’ judgments based on information about changes in signing auditors are rational and effective.

Complex interplay of R&D, advertising and exports in USA manufacturing firms: differential effects of capabilities

PurposeThis study aims to explore the dynamic interplay of key resources (i.e. research and development (R&D), advertising and exports) in affecting the performance of USA manufacturing firms. Specifically, the authors examine the dynamic impact of joint resources and predict differential effect scales contingent on firm capabilities.Design/methodology/approachThis study presents a combined multiple regression analysis (MRA)-multilayer perceptron (MLP) neural network modeling and investigates the complex interlinkage of capabilities, resources and performance. As an innovative approach, the MRA-MLP model investigates the effect of capabilities under the combinatory deployment of joint resources.FindingsThis study finds that the impact of joint resources and synergistic rents is not uniform but rather distinctive according to the combinatory conditions and that the pattern is further shaped by firm capabilities. Accordingly, besides signifying the contingent aspect of capabilities across a range of resource combinations, the result also shows that managerial sophistication in adaptive resource control is more than a managerial ethos.Practical implicationsThe proposed analytic process provides scientific decision support tools with control mechanisms with respect to deploying multiple resources and setting actionable goals, thereby presenting pragmatic benchmarking options to industry managers.Originality/valueUsing the theoretical underpinnings of the resource-based view (RBV) and resource orchestration, this study advances knowledge about the complex interaction of key resources by presenting a salient analytic process. The empirical design, which portrays holistic interaction patterns, adds to the uniqueness of this study of the complex interlinkages between capabilities, resources and shareholder value.

A Configurational Approach to Maturity Model Development – Using fsQCA to Build a Multiple-Pathway Maturity Model

Maturity models can be used as tools to depict the developmental trajectories of entity classes in domains and evaluate the relative position of an entity within this framework. However, their development process has been the focus of researchers and practitioners ever since, resulting in different procedures, development approaches, and conceptual models. Thus, a major criticism of maturity models is the often missing conceptual and theoretical grounding when it comes to the interpretation of the concept of maturity. To address this shortcoming, our research approach focuses on the rigorous development of a multiple-pathway maturity model. By following a sequential, theoretically grounded process, the resulting maturity model can be viewed as an instantiation of the predefined conceptual components and characteristics in a predefined domain. We present and discuss the instantiated sector and size-specific maturity model for innovation capability in small industrial firms, which is developed by applying configurational methods on a dataset and thereby offers multiple pathways to maturity. This concept of equifinality is central to our approach. It has rarely been considered in maturity model development research, although it offers the potential to build more realistic models with greater applicability, especially in domains with many interdependencies.