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Dynamic capabilities as (workable) management systems theory

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Abstract

In management studies, systems theory is an underexplored construct consistent with the dynamic capabilities framework. The systems approach received attention from management scholars in the middle of the last century, but, since then, has been largely abandoned. Meanwhile, academic disciplines have continued to narrow their focus. The capabilities and systems frameworks both adopt a holistic view that calls for all elements of an organization to be in alignment, and both recognize the importance of some form of learning for the purpose of adaptation. Dynamic capabilities go further by recognizing that organizations not only adapt to the business environment, they often try to shape it, too. While systems theory emphasizes internal stability over time and homogeneity across similar systems, dynamic capabilities include an explicit role for management/leadership that allows systemic change to start from within, which is the source of heterogeneity across firms. Dynamic capabilities are part of a system that includes resources and strategy. Together they determine the degree of competitive advantage an individual enterprise can gain over its rivals.

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... The Dynamic Capabilities View is an organisational theory that emphasises that the ability of an organisation to react adequately and timely to external changes requires a combination of multiple capabilities (Teece et al.1997). The dynamic capabilities theory analyses how firms build, integrate, and redesign their internal and external firm-specific proficiencies into innovative proficiencies, matching environmental opportunities and constraints in addressing rapidly changing environments (Teece, 2018;Teece et al. 1997). The theory advocates that businesses with more dynamic capabilities outperform those with fewer capabilities. ...
... The choice of the DC as one of the theoretical lenses of this study is due to its ability to analyse how firms build, integrate, and redesign their internal and external firm-specific proficiencies into innovative proficiencies to gain competitive advantage, especially when it comes to the adoption of technologies (Alkhamery et al. 2021;Gupta et al. 2020;Teece 2018). The DC theory also applies to this study because it presents a basis for today's supply chain managers who use a range of social technologies from general free platforms to self-managed communities to paid services and to enhance their dynamic ability to identify the best and precise environment to do business (Arifin 2015). ...
... The names of the selected firms have been renamed for the sake of anonymity and confidentiality. This assertion is based on the conceptualisation of the TOE framework on a firm's decision-making regarding the adoption of technological innovations (Ng et al. 2022;Siagian et al. 2022;Teece 2018). It is also based on the DC theory's ability to analyse how firms build, integrate, and redesign their internal and external firm-specific proficiencies into innovative proficiencies to gain competitive advantage, especially when it comes to the adoption of technologies (Alkhamery et al. 2021;Gupta et al. 2020;Teece 2018). ...
... [27] highlighted that dynamic capabilities enhance firms' innovative capacities across diverse market environments by optimizing resource allocation and enabling agile decision-making, particularly within the green technology sector. Teece (2018) [28] expanded the theoretical framework of dynamic capabilities, proposing a management system-supported dynamic capability architecture that fosters long-term growth in green innovation. Additionally, [29] explored how firms leverage dynamic capabilities to reshape their resource base, thereby enhancing the adaptability and sustainability of green innovation. ...
... For example, the level of green technology standardization within an industry and the green technology demands of business partners can influence a firm ' s investment in green technologies. Competitive pressure within the industry also drives firms to increase their green technology investments to maintain a competitive edge (Teece, 2018). ...
... Considering the interplay among environmental turbulence, dynamic capabilities, and R&D models, firms ' green technology innovation pathways exhibit notable differentiation. Faced with unstable and unpredictable market environments, firms experience significantly heightened uncertainty, necessitating robust dynamic capabilities to swiftly adjust strategies and tackle the multifaceted challenges brought about by external shifts (Teece, 2018). Dynamic capabilities endow firms with flexibility and adaptability, enabling them to integrate and reorganize both internal and external resources, thereby enhancing resilience across every phase of the innovation process [57] . ...
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Green technological innovation has become a pivotal tool for driving economic restructuring and achieving environmental sustainability. However, in the face of complex and volatile market and policy environments, a critical question remains: how can enterprises effectively select and implement innovation pathways to address environmental turbulence? Drawing on data from 14,751 Chinese listed companies from 2012 to 2022, this study employs dynamic capabilities theory and a fixed-effects panel model to examine the impact of dynamic capabilities on firms’ choice of green innovation pathways. Results show a significant positive influence of dynamic capabilities on green innovation, although this effect varies depending on the research and development model and the level of environmental turbulence. Firms with high dynamic capabilities tend to favor independent research and development, with an effect coefficient of 0.778 (p<0.01); firms with moderate dynamic capabilities benefit more from cooperative research and development, with a coefficient of 0.045 (p<0.01); and firms with lower dynamic capabilities primarily pursue green innovation through technology transactions, with a coefficient of 0.052 (p<0.01). Furthermore, environmental turbulence significantly moderates the relationship between dynamic capabilities and green innovation negatively, with an interaction coefficient of -0.088 (p<0.05), indicating that environmental uncertainty weakens the positive impact of dynamic capabilities.These findings suggest that firms can select suitable research and development models aligned with their level of dynamic capabilities and adopt flexible innovation strategies to effectively manage environmental turbulence. This study proposes the following policy recommendations: enterprises should strengthen their dynamic capabilities, particularly in knowledge acquisition, resource integration, and adaptability to environmental changes, to enhance their green innovation capacity. Additionally, the government should increase policy support for green technological innovation by offering financial subsidies, tax incentives, and intellectual property protections, helping enterprises maintain their innovation momentum amid environmental turbulence.
... According to Winter (2003) and Daniel et al. (2014) zero-order ordinary and first-order capabilities can be not sufficient to compete in this environment, and second-order capabilities should be developed by enterprises. Organizational capabilities include ordinary capabilities for routine operations (Kohli & Grover, 2008;Melville et al., 2004), DCs for adapting to market changes (Helfat et al., 2023;Teece, 2018), and improvisational capabilities for quickly reconfiguring resources in response to unexpected situations (Pavlou & El Sawy, 2010). Hence, firms that substantially invest in IT to enhance organizational capabilities through (DCs (Steininger et al., 2022) and improvisational capabilities (ICs) can exploit opportunities, mitigate risks, and reconfigure their resource base, enabling them to better navigate and innovate within this dynamic context. ...
... On the other hand, a dynamic capability allows an enterprise to change its existing operations, enabling it to adapt or enhance its functions, whether by modifying operational capabilities, the organization's resource base, or aspects of the external environment or ecosystem (Helfat et al., 2023;Teece et al., 1997). According to metaanalyses (Helfat et al., 2023) and theoretical studies (Teece, 2018) on organizational capabilities, the DCs view (DCV) is a better way to explain why companies do better in the market than the rigiditybased view (RBV). This is because DCs make a company more flexible over time and less rigid. ...
... DITC is defined as first-order DCs that enable organizational capabilities as a second-order into DCs (Daniel et al., 2014) and improvisational capabilities (Pavlou & El Sawy, 2010). Past research on DCs is grouped into three main organizational capacities: (1) sensing, involving the recognition and evaluation of potential opportunities and risks; (2) seizing, allocating resources to respond to these opportunities or risks and deriving benefits; and (3) transforming, focused on ongoing adaptation and renewal (Teece, 2007(Teece, , 2018Teece et al., 2016). Thus, DITC helps firms to capture, harness, and understand customer data (Aydiner et al., 2019;Knabke and Olbrich, 2018;Pappas et al., 2018;Mikalef et al., 2019) through digital technologies, such as social, and mobile, analytics and cloud [ITI, (Frishammar et al., 2018)]. ...
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The advent of the digital era has transformed the way businesses create, compete, and maintain their existence, particularly in the aftermath of the COVID-19 pandemic. To maintain resilience in the ever-changing business landscapes of today, especially in emerging economies, businesses utilize dynamic information technology capabilities (DITC) to cultivate organizational capacities that foster innovation. This article argues that Dynamic Innovation and Technological Capabilities (DITC) allows companies to develop flexible and adaptive skills to foster innovation. The results from 684 Brazilian businesses showed that implementing Dynamic Information Technology Capabilities (DITC) improved their ability to come up with both new ideas and ways to use existing ones. This was possible because DITC improved the firms' dynamic and improvisational skills. The post hoc analysis of FIMIX PLS and PLS-POS reveals that DITC plays a greater role in fostering innovation through dynamic capabilities rather than improvisational capabilities. The research on unobserved heterogeneity showed that a high level of DITC has big and strong effects on developing dynamic and improvisational skills for coming up with new ambidexterity ideas. The results indicated that companies should integrate the potential of digital technology and information to establish organizational capacities that can effectively compete within developing economies.
... Systems theory illustrates how organizations respond to environmental complexity (Williams et al., 2017). Systems theory views organizations as social systems that, in turn, are made up of sub-systems that must interact in a harmonious manner for the organization to be effective (Churchman, 1968;Teece, 2018). In the case of a business ...
... Feedback loops enable adaptation to environmental changes. A single company that can itself be analyzed as a system is part of a larger industrial or business ecosystem, as it is also connected with other firms in its value chain (Teece, 2018). Within the company there are activities, such as production, marketing, etc., each of which can be analyzed as a system linked to other systems, both internally and externally (Teece, 2018). ...
... A single company that can itself be analyzed as a system is part of a larger industrial or business ecosystem, as it is also connected with other firms in its value chain (Teece, 2018). Within the company there are activities, such as production, marketing, etc., each of which can be analyzed as a system linked to other systems, both internally and externally (Teece, 2018). With regards to sustainability management, the systems theory perspective lends support to identifying where a system can accept and create positive change, and where it is most vulnerable (Holling, 2001). ...
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Companies face difficulties when attempting to implement corporate sustainability (CS), especially linking operational activities to their overall sustainability strategy remains a main challenge. The present study applies a single‐case study approach to contribute to literature on CS implementation and to provide a framework for the deployment of CS strategies. The company under study is a medium‐sized company that has set sustainability targets using a typical management system for strategy deployment, namely hoshin kanri. The data collected is derived from company documents, observations, and 12 semi‐structured interviews with department managers and employees, and qualitative content analysis was used for data analysis. The results illustrate that clear definition of sustainability, measurability of sustainability targets, employee involvement, and motivation, and prioritization of long‐term sustainability objectives are necessary prerequisites for successful CS strategy deployment. Challenges relate to lack of time capacity (workload), specific industry‐context, and the difficulty of social impact assessment. Finally, a framework for CS implementation is proposed which incorporates stakeholder, systems, and dynamic capabilities perspectives. This research contributes to the literature linking CS strategy to practice, illustrating the related prerequisites and challenges in implementation, and provides a practical approach towards the deployment of CS strategies.
... In recent years, the need to address various disruptive environmental events, such as natural disasters, the COVID-19 pandemic, or the Ukraine war, has rekindled the academic interest in OR (Wang et al., 2023). Although discussions persist regarding its definition and measurement (Hillmann, 2021), the dynamic capabilities framework (Teece, 2018) suggests that OR can be understood as a company's ability to survive, adapt, recover, and improve in the face of unforeseen and catastrophic events that impact its strategic and organizational processes (Ma et al., 2018). Despite the growing interest in the topic, most works addressing resilience are conceptual. ...
... Within the dynamic capabilities framework (Teece, 2018), OR is considered a capability (Ma et al., 2018). Chen et al. (2021, p. 19) define it as the "ability of an organization to reconfigure organizational resources, optimize organizational processes, reshape organizational relationships in a crisis, recover quickly from the crisis, and use the crisis to achieve counter-trend growth." ...
... According to the dynamic capabilities framework (Teece, 2018), resources and capabilities determine the strategic orientation of the company (Helfat & Martin, 2015). If a company has an appropriate configuration of resources and capabilities, it can develop a defined and focused strategic posture to adapt quickly to changes in the environment and the demands of its stakeholders. ...
Article
This work analyzes, under a strategic approach, the role of organizational resilience (OR) in connecting pioneering orientation (PO) and sustainability orientation (SO), thus filling a significant and unexplored gap in the literature. The empirical study was conducted on a sample of 223 companies in the cultural tourism industry in Spain. The results show a total mediating effect of OR in the relationship between PO and SO in its economic, environmental, and social dimensions and a partial effect in the case of the cultural dimension. The study highlights the U-shaped curvilinear relationship between PO and OR, reflecting a brake on the growth of OR when companies have a strong tendency to enter the market early. Companies should adopt the role of early followers to strengthen resilience and achieve a strong strategic commitment to sustainability.
... It recognizes that these activities are continuous and that at the end of each resource transformation, they create a new reality that will have internal and external effects on the organization. These effects act systemically and may affect other competencies or organizational resources indirectly (Teece, 2018). Schilke et al. (2018) reinforce that it is essential to contextualize the empirical study of DC with a certain precision in defining and measuring specific instances of resources. ...
... Studies empirically indicate that this argument is valid (Yang et al., 2017;Yeow et al., 2018) and that the leader has to master skills and competencies linked to four guidelines in the resource alignment process: strategic vision, the vision of technological transformation, business vision, and process vision (Li et al., 2016). Recognizing the role of individuals and leadership, the systemic reflexes, and defining the context of DC, companies can create a strategy oriented to DC in a more integrated way, which can improve business performance (Teece, 2018 The business performance results generated by the DC are diverse and vary according to the defined strategic objective. Researchers have identified several significant gains in operational efficiency due to improved information processing capacity, learning mechanisms, sharing culture, and strategic resource allocation (Battleson et al., 2016;Chen et al., 2015;Yang et al., 2017). ...
... These insights allow the company to apply this knowledge through micro-foundations of the organization's dynamic resources and abilities, generating outcomes such as flexibility, agility, innovation, ambidexterity, and innovations in organizational processes (Kranz et al., 2016;Teece, 2007;Trantopoulos et al., 2017). In other words, besides the firstorder functional skills a company internalizes through the ACAP, this knowledge can intervene with different capabilities of a superior order of indirect form (Teece, 2018). ...
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Purpose This article aims to validate a systemic model that helps to understand the contributions of dynamic capabilities to the benefits generated by the strategic use of information technology in alliances between companies. Originality/value Digital transformation has evolved in recent years and is present in organizations as an essential initiative in their competitive strategy, requiring them to develop a culture favorable to digital innovation, skills, and competencies for the intense use of these technologies. The value includes theoretical contributions on dynamic capacities and benefits generated for the strategical use of information technology, as practical contributions help companies in digital transformation. Design/methodology/approach The research question in this paper is: How do dynamic capabilities support the strategic use of information technology and increase the utilization of its benefits in the context of alliances and digital transformation? A multiple case study was carried out with insurance companies and insurtechs in Brazil. It analyzed the learnings generated in the partnerships and how the insurance companies used this learning to improve their skills, develop dynamic capacities, and strengthen the strategic use of information technology and its benefits. Findings The results confirmed that the learning from strategic alliances is assimilated and applied in other dynamic capacities, enhancing the benefits of the strategic use of information technology by improving those aspects. KEYWORDS: digital transformation; dynamic capabilities; absorptive capacity; strategic use of information technology; strategic alliances
... The DCT arises as an alternative technique to solve the inherent shortcomings of the RBV [43]. Dynamic capabilities are an extension of the resource, which effectively links resources and performance [44]. RBV indicates that rare, valuable, non-imitable, and non-substitutable internal resources afford a business a robust competitive advantage [45]. ...
... RBV indicates that rare, valuable, non-imitable, and non-substitutable internal resources afford a business a robust competitive advantage [45]. Businesses can develop, integrate, and reconfigure their capabilities and resources using the framework that DCT offers in order to quickly respond to changing environments [44]. SMEs naturally rely more on intangible resources to retain sustainable competitive advantages because of their severe resource restrictions and the restricted availability of tangible assets relative to intangible assets [46].Therefore, SMEs can benefit the organization by leveraging intangible resources (such as human capital). ...
... According to the RBV and DCT, organizations possessing resources with core competitive advantages contribute to developing dynamic capacities, thereby enhancing job performance [44]. This suggests that core strategy resources can indirectly improve job performance by enhancing dynamic capabilities [45]. ...
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Background In the digital era, the role of digital leadership is becoming increasingly prominent. However, the exploration of the alignment between digital leadership and high-involvement human resource management practices (HI-HRMPs) in influencing employee-based resources remains an overlooked research area among current scholars. Objective This study aims to analyze the influence of these elements on the digital performance of employees. Based on the Resource-Based View (RBV) and Dynamic Capability Theory (DCT), this research focuses on Chinese Small and Medium Enterprises (SMEs) and employs purposive sampling to select four representative regions in China (Shanghai, Guangzhou, Guizhou, and Anhui). The survey targeted employees within SMEs and was conducted using questionnaire surveys. Structural equation modeling (AMOS) is utilized for analysis. Results The findings indicate that: (1) digital leadership cannot directly influence employee digital performance and employee dynamic capability but can directly influence HI-HRMP; (2) HI-HRMP mediate the influence of digital leadership on employee digital performance, but employee dynamic capability cannot mediate the influence of digital leadership on employee digital performance; (3) HI-HRMP and employee dynamic capability play a chain mediating role between digital leadership and employee digital performance. Conclusion In the digital market, digital leadership improves employee digital performance by boosting HI-HRMP and enhancing employee dynamic capabilities. The findings support studies on practical applications and link between digital leadership and employee digital performance. The uniqueness of this study lies in applying HI-HRMP and employee dynamic capabilities as chain mediating variables in the digital market. This approach extends the application of HRMPs and dynamic capability theory, providing theoretical guidance and decision support for the digital operations of SMEs.
... Sensing refers to the use of well-established internal processes to clarify the target market and identify customer needs, changes in trends, and related innovative activities while keeping an eye on industry trends [127]. This information about risks and opportunities is then absorbed into the company and used as resources to drive organizational capabilities to create customer value [128], and customers recognize and prefer the special value of the company's products, which leads to increased loyalty to the company's image and brand, and finally leads to corporate performance [129]. ...
... Seizing indicates that a company invests in acquiring solutions to have customers and keep them connected and actively develops new business models by incorporating rational feedback from customers into the company's management and changing the way it traditionally operates [127]. Business models developed based on this awareness of customers and markets are continuously innovated to provide products and services that lead to better understanding customer needs and trends [8], and the company's image and brand continue to drive customer interest. ...
... Reconfiguration refers to the absorption and integration of knowledge and know-how gained from creating and implementing new marketing strategies in response to changes in the times identified through sensing and seizing while applying new ways of redeploying resources as needed [127]. This reconfiguration is a strategic choice for companies that are proactive and fast-paced yet successful [8]. ...
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This study examines the relationship between digital transformation and both the corporate image and brand awareness of global companies through the mediating effects of functional value, symbolic value, experiential value, emotional value, and social value, all of which are components of customer value. This study mainly focuses on the structural relationship in which digital quality, which is subdivided into system quality, information quality, and service quality, affects non-financial corporate image as a company with good corporate governance, a company that is good at social contribution activities, and an eco-friendly company through the mediating function of customer value. As part of the empirical analysis, an online survey was conducted among 504 employees from different global companies in China, and the PLS structural equation model was employed as a specific analysis tool. Key findings indicate that changes in system quality, information quality, and service quality resulting from digital transformation have varying influences on the five components of customer value. These factors also deliver the effect of improving corporate image in the ESG dimension by penetrating customers’ emotional and social values. Essentially, all components of dynamic capability significantly impact all components of customer value. Furthermore, all components of customer value influence corporate performance, while uncertainty affects a company’s market performance.
... It focuses on business survival under a highly turbulent environment (Gupta et al., 2021). As per DCV, organizations are recommended to develop higher-order capabilities that further help them advance their sensing, seizing and reconfiguring capabilities (Teece, 2018). Consequently, organizations can concentrate on sensing the changes in the surroundings, seizing the opportunity to transform and reconfiguring the resources to attain competitive advantage (Teece, 2007). ...
... DCV's objective of realigning the internal resources to external changes complements the idea of strengthening resilience by quickly responding and helping recover from any disruptions (Bag et al., 2019;Irfan et al., 2022). The dynamic capabilities (DCs) of an organization have the ability to influence the speed and degree of the organization's reaction toward any uncertain event (Teece, 2018). In addition, higher-order DCs like sensing, seizing and reconfiguration are expected to enhance the adaptive characteristics of organizational resilience (Teece et al., 2016). ...
... Thus, the characteristics of organizational resilience are aligned with the outcomes of DCs, which provide a competitive advantage to the organization (Teece, 2007(Teece, , 2018Teece et al., 2016;Bahrami and Shokouhyar, 2021;Dovbischuk, 2022;Kähkönen et al., 2023;Yu et al., 2019). Therefore, the DCV provides an appropriate theoretical perspective to understand the capabilities within an organization that strengthen organizational resilience. ...
Article
Purpose Organizational resilience is a prerequisite to ensure preparedness and quick recovery from disruptions for an organization. However, there is scant literature that examines antecedents that are associated with resilience. This study aims to evaluate antecedents of organizational resilience considering three factors: sustainable supply chain management (SSCM), business model adaptation (BMA) and digitalization. Design/methodology/approach This study considers the dynamic capability view as a theoretical lens to formulate the hypotheses between the mentioned constructs. The authors test the hypotheses based on the data collected from 259 manufacturing companies. The authors consider structural equation modeling and mediation analysis to analyze the proposed hypotheses. Findings The results of structural equation modeling suggest that there is a positive association between SSCM and organizational resilience. Furthermore, the results suggest that digitalizing the business processes and deploying an adaptable business model can help organizations enhance their resilience levels. Originality/value This study contributes to the literature by identifying dynamic capabilities that can influence organizational resilience and extending the relevance of BMA and digitalization in the context of sustainability and resilience. Furthermore, this research informs managers on effective pathways for managing future disruptions.
... The dynamic capabilities theory posits that entrepreneurial ventures should focus on developing dynamic capabilities, which refer to the ability to adapt and change in response to market shifts and challenges (Teece, 2018). Understanding this theoretical framework can provide a solid foundation for analysing and enhancing the entrepreneurial resilience of South African startups. ...
... It is very important that startups be resilient or develop resilience as it would enable them to withstand and recover from setbacks, adapt to changing circumstances, and emerge stronger. Teece (2018) states that the dynamic capabilities theory aligns with the entrepreneurship resilience concept and emphasises the importance of building capabilities that allow organisations not only to survive but also to prosper in turbulent conditions. Startups can use dynamic capabilities to reconfigure their resources and processes in response to challenges, helping them bounce back from adversity. ...
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Entrepreneurial resilience is a key factor in determining the long-term success and sustainability of startup businesses in a business environment that is characterised by a distinctive blend of opportunities and constraints. These startups operate in a dynamic environment characterised by rapid economic shifts, varying access to resources, and a mix of cultural diversity. In this context, the ability to withstand adversity, and adapt and thrive amid challenges, becomes paramount for entrepreneurs. The main aims of this study were to explore the South African entrepreneurship journey; investigate the meaning and significance of the VUCA (volatility, uncertainty, complexity, ambiguity) paradigm; identify the key factors that shape entrepreneurial resilience; and analyse entrepreneurial resilience strategies through a case study. A qualitative research approach using a traditional literature review technique was adopted to reach a deeper understanding of the intricate dynamics of small, medium, and micro-enterprises (SMMEs) in South Africa. Findings reveal that only 28 percent of South African startups survive for more than three years, compared to an average of 50% in other countries. The study confirmed that without a clear understanding of VUCA and the implementation of appropriate strategies to address its implications, startups in South Africa will continue to struggle to achieve sustainable growth and success.
... Teece et al.'s (1997) dynamic capabilities framework further extends this concept, suggesting that AI can enhance an 3 organization's ability to reconfigure its resource base in response to changing environments. (Teece, 2018) Building on these theoretical foundations, recent studies have explored the strategic implications of AI. Chen et al.'s work on the use of machine learning for market trend prediction is particularly relevant, as it demonstrates the potential of AI to improve the accuracy and speed of strategic decision-making. ...
... However, our research goes further by highlighting the importance of human-AI collaboration, a aspect not extensively covered in previous studies. (Weber et al., 2022) Theoretical and Practical Implications 9 5. Cross-cultural studies to understand how different cultural contexts influence AI adoption and effectiveness in strategic management. ...
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This study investigates the emerging applications of Artificial Intelligence (AI) in strategic management and its impact on organizational decision-making processes. As AI technology rapidly advances, it has become a crucial component in redefining organizational strategies. According to a global survey by the Boston Consulting Group, over 60% of executives believe that AI can significantly improve key performance indicators and enhance opportunities for strategic differentiation and sustainable competitive advantages. Using a descriptive-survey methodology and questionnaire-based data collection, this research examines the influence of AI on strategic decision-making in large organizations. The statistical population comprises senior managers across various industries, with sampling conducted through convenience sampling. Data analysis was performed using SMART-PLS software, revealing significant improvements in strategic decision-making processes through AI implementation. The study demonstrates that AI, by analyzing complex data sets and identifying hidden patterns, assists managers in making more optimal decisions. Furthermore, AI's predictive analytics capabilities contribute to enhanced strategic planning and risk mitigation in decision-making processes. The research findings indicate a statistically significant positive correlation (r = 0.72, p < 0.001) between AI adoption and the quality of strategic decisions. This paper concludes by proposing that organizations should leverage AI as a tool to strengthen their organizational strategies, while emphasizing the importance of ethical considerations and human oversight. The implications of this research extend to both academic and practical domains, offering insights into the integration of AI in strategic management processes and its potential to revolutionize organizational decision-making paradigms.
... Like any system, to evolve and thrive, its constituent parts require constant adaptation to changing environments. An optimal strategy for a system to evolve is to preserve the overall objectives of the system and still be able to adapt independent parts (Teece, 2007(Teece, , 2018. Equally important is matching core competences and capabilities to challenges posed to the system (and its parts) by outside forces. ...
... Dynamic capabilities are often analyzed at the level of the corporation, but they exist and are important at the 'country ', 'industry', 'unit', 'community', 'product', and 'managerial' levels (e.g. Adner & Helfat, 2003;Amaral et al., 2023;Pitelis & Teece, 2016;Teece, 2018;Wenzel et al., 2021). During a disruptive event, policy responses may become more short term, and focussed on political popularity. ...
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The purpose of this paper is to establish a policy framework for those responsible for maximising the opportunities of inward foreign direct investment (FDI). Our proposed framework intellectualises the need for dynamic capabilities at the country level (national and local) to sense and seize new opportunities from inward FDI, use this knowledge to mobilise resources and, over time, make changes to reconfigure the UK’s location-specific advantages in a post-Brexit marketplace. Using the backdrop of the UK’s decision to exit the European Union in May 2016 (Brexit) alongside other global challenges (the COVID-19-induced supply chain crisis, political unrest, wars, new trade deals), we explore the changing nature of FDI entering the UK. We explain why an adaptive investment promotion strategy means greater and more widespread benefits of inward FDI for the economy. Then, we propose a policy-oriented dynamic framework for how the benefits of FDI can be maximised during political upheaval. In our analysis and discussion, we highlight how changes in foreign firms’ FDI motives can alter the UK’s value proposition, and over time, the nature of a country’s specific advantages.
... According to Krasnikov and Jayachandran (2008), integrating dynamic capabilities into organizational practices imparts a competitive advantage that may be challenging for rival firms to emulate. Teece (2018) believes that capabilities such as entrepreneurial orientation, learning, market and export orientations, export knowledge, and access to finance fit well with the dynamic capability view. Therefore, the variables identified by Teece (2018) are anticipated to influence the export performance of SMEs in Nigeria in the present study. ...
... Teece (2018) believes that capabilities such as entrepreneurial orientation, learning, market and export orientations, export knowledge, and access to finance fit well with the dynamic capability view. Therefore, the variables identified by Teece (2018) are anticipated to influence the export performance of SMEs in Nigeria in the present study. ...
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This research is aimed at enhancing comprehension and validation of the variables that drive the export performance of small and medium enterprises (SMEs) in Nigeria. Notwithstanding the paucity of evidence regarding the export experiences of SMEs from developing countries in the literature, studying the SME setting is crucial, given its growing significance in enhancing national and global economies. A survey design was used to gather data from owners and managers of Nigerian SMEs that were involved in exports. Based on convenience sampling, 450 questionnaires were distributed. Of this number, 278 valid responses were returned. The study model was assessed via partial least square structural equation modelling (PLSSEM), and the statistical package for social science (SPSS v24) was used for preliminary analysis. The results seem to suggest that the seven-construct measurements-entrepreneurial orientation, market orientation, learning orientation, export orientation, export knowledge, access to finance, and export performance are well suited for estimating the variables under investigation in a Nigerian setting. Similarly, the direct relationship between the exogenous and endogenous constructs was positive and significant. The outcomes validated applying the dynamic capability view and its principles to explain the success of the export performance of SMEs in Nigeria.
... Teece's study underpins dynamic capacity theory and RBV theory, which are related. Teece (2018) suggests employing dynamic capabilities to handle changing contexts: leveraging internal and external firmspecific skills. From an efficiency-based dynamic capabilities perspective, firm-specific talents can be leveraged to their full potential by describing their features and outlining the generation, deployment, and preservation of a combination of skills and resources. ...
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The increased level of competition in the current business climate required the implementation of processes and systems to guarantee a sustainable organisational competitive advantage for the benefit of stakeholders. This research evaluates the association between product innovation and manufacturing firms' sustainable competitive advantage, determine the effect of process innovation on manufacturing firms' sustainable competitive advantage, examine the influence of administrative innovation on manufacturing firms' sustainable competitive advantage and ascertain the joint relationship between product, process, and administrative innovation on manufacturing firms' sustainable competitive advantage. Descriptive research design was adopted and a sample size of 131 manufacturing firms was used for the analysis. Data were collected using a questionnaire and analysed using regression analysis with the aid of SPSS Version 25. The findings showed that product innovation (β = .524, p < .005) process innovation (β = .417, p < .005) and administrative innovation (β = .488, p < .005) significantly influenced firm sustainable competitive advantage, individually and jointly. The research concludes that manufacturing organisations should prioritise innovation in their strategic plans. This study suggests ongoing product improvement through process and administrative adjustments and a culture of innovation and experimentation to find new sources of competitive advantage and create sustainable value.
... There are a number of theories and models with relevance to this study. The dynamic capabilities theory asserts that public or private organizations must regularly channel their skills and allocate human, technical, and financial resources to adapt to continuous technological changes in order to meet society's growing expectations (Teece 2018). Simultaneously, the sustainable innovation theory posits that these new technologies lead to ongoing changes in sustainable operating modes and stimulate responsibility towards employees and partners in social, environmental, and economic areas (Schaltegger et al. 2016). ...
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The aim of this article is to explore the impact of digitalization on corporate social responsibility (CSR) in the automobile insurance sector in Morocco. This article first explores the theoretical and conceptual foundations of digital transformation and CSR. A mixed methods approach is then used, combining qualitative interviews with a wider quantitative survey, to investigate how digital innovations influence CSR practices. Interview analysis provides the basis for the development of a conceptual framework and eight hypotheses, which are then tested using quantitative techniques to analyze survey data. The results reveal several links between the benefits of digitalization and CSR. Claims management platforms, digital roadside assistance tools, and digital vehicle assessment and inspection all positively impact policyholders' well-being in terms of compensation and asset preservation, thereby enhancing the CSR profile of automobile insurers. Similarly, augmented reality (AR) and virtual reality (VR) training and simulation, as well as repair assistance, have positive impacts on policyholders' well-being and advance the CSR positioning of automobile insurers. This article has limitations as it is based on a narrow industrial sector in a single country, but it nonetheless highlights certain relevant interrelationships between digitalization and CSR, contributing to the development of theory and practice in these research areas.
... Dynamic capabilities refer to a firm's ability to integrate, build and reconfigure internal and external competencies to address rapidly changing environments. They enable organisations to adapt, innovate and remain competitive in dynamic markets (Teece 2018). This theory assists in rapidly creating, improving or structuring resources to achieve excellence in a dynamic market environment (Owoseni & Twinomurinzi 2019), coping with change to meet market needs (Ambrosini & Altintas 2016), competition in the long term (Brown, Foroudi & Hafeez 2019), as a mediator on the performance (Bitencourt et al. 2019). ...
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Background: Small and medium enterprises (SMEs) are crucial to both global and national economies. They create jobs, boost competitiveness and drive economic growth. In the digital age, SMEs have increased opportunities to expand, enhance their capabilities and compete effectively.Aim: This research explores how environmentally conscious SMEs improve performance using dynamic capabilities (DCs) approach. It specifically examines how e-commerce and management capabilities contribute to SME performance in the Indonesian culinary sector and highlights the role of strategic orientation in this study.Setting: The study focusses on SMEs in the culinary sub-sector located in West Java, DKI Jakarta, and Banten provinces in Indonesia. These regions were selected because of their vibrant culinary industries and the significant role SMEs play in the local economy and gross domestic product (GDP).Methods: A quantitative analysis was conducted using online surveys via Google Forms, collecting 236 responses. The data were analysed with Partial Least Squares Structural Equation Modeling (PLS-SEM) using Smart PLS 3.0 software.Results: Four hypotheses about DCs and SME performance were tested, with three being accepted. The study found that DCs alone do not directly enhance SME performance.Conclusion: The study highlights the importance of strategic orientation in mediating DCs with SME performance. In the digital era, aligning goals with market needs helps SMEs use their DCs more effectively, adapt to changes, innovate and grow sustainably.Contribution: This research contributes to the literature on DCs and strategic management, offering insights into improving SME performance in Indonesia.
... Competitive advantages depend on employees' entrepreneurial activity via SR-HRM and leadership. Engagement helps adapt to dynamic environments, seize opportunities, and innovate (Teece, 2018). Study enhances leadership and HRM literature, promoting KoL for knowledge and innovation. ...
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This study investigates the influence of socially responsible human resource management (SR-HRM) on employees' entrepreneurial behaviour (EEB) in the manufacturing sector. Anchored in the social exchange theory, the research explores the intricate dynamics between SR-HRM practices, EEB, and knowledge hiding tendencies among employees. The choice of the manufacturing sector stems from the sector's reliance on skilled labour and the consequential impact on performance and innovation. A sample of 384 employees participated, with data collected through adapted questionnaires administered both in person and online. The findings indicate that SR-HRM significantly predicts EEB while negatively influencing knowledge hiding. Moreover, knowledge hiding mediates the relationship between SR-HRM and EEB. The study also identifies knowledge-oriented leadership as a crucial moderator in these dynamics. In practical terms, these insights guide HR managers and industrial psychologists in recruitment, selection, and intervention strategies to foster social exchange theory and mitigate knowledge hiding's adverse effects in the manufacturing sector.
... This includes identifying specific R&D activities for introducing product and service innovations in the market; and carrying out several operational changes like using modern network supervision systems and environment friendly solutions. The use of a dynamic capabilities approach can help GSM providers improve the operational efficiency, and subsequently, the cost and satisfaction levels of customers, thereby achieving a sustainable competitive advantage in the highly saturated telecommunications industry (Teece, 2018) [20] . ...
Article
This study investigates the effects of product, service, process, and technological innovations on the competitive advantage of GSM service providers in Jalingo, Taraba State, Nigeria. It aims to determine how these different types of innovations influence market positioning and operational efficiency within the regional telecommunications sector. The research is framed using Dynamic Capabilities Theory, which emphasizes the role of strategic adaptability and resource reconfiguration in achieving and sustaining competitive advantage in rapidly changing markets. Employing a mixed-methods approach, the study integrates quantitative data from structured questionnaires distributed to 115 staff across major telecom providers and qualitative insights from industry reports. A total of 102 responses were analyzed using regression analysis in SPSS to evaluate the effect of innovation types on competitive advantage. The findings reveal that all types of innovation—product, service, process, and technological—significantly enhance the competitive advantage of GSM providers in Jalingo. Service innovation showed the strongest effect, followed by technological, product, and process innovations. The study underscores the critical importance of a holistic innovation strategy that includes diverse forms of innovation to improve competitive advantage. GSM providers in Jalingo who embrace comprehensive innovation strategies are more likely to secure greater market share and achieve long-term profitability. The study recommends that GSM service providers should prioritize developing new service offerings and enhancing existing services. This could include investing in customer relationship management systems to personalize services, implementing loyalty programs, or introducing flexible pricing models that cater to different customer segments.
... Mereka harus mampu dengan cepat beradaptasi dengan perubahan pasar, teknologi, atau regulasi. Kemampuan beradaptasi memungkinkan wirausahawan strategis untuk merespons perubahan eksternal dengan cara yang proaktif dan tetap kompetitif (Teece, 2018). ...
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Makalah ini membahas penerapan Strategic Entrepreneurship pada contoh kasus Hary Tanoesoedibjo, seorang pengusaha sukses di Indonesia yang memimpin MNC Group. Studi ini bertujuan untuk memahami bagaimana karakteristik dan strategi kewirausahaan yang diterapkan oleh Hary Tanoesoedibjo dalam menghadapi dinamika pasar dan perkembangan teknologi. Dengan menggunakan kerangka Strategic Entrepreneurship, yang menggabungkan inovasi, perencanaan strategis, dan eksekusi jangka panjang, makalah ini mengeksplorasi strategi diversifikasi, inovasi berkelanjutan, dan ekspansi global yang dilakukan oleh Hary. Pendekatan ini berhasil menjaga stabilitas dan pertumbuhan bisnis MNC Group di berbagai sektor, termasuk media, properti, dan keuangan. Analisis ini menunjukkan pentingnya visi jangka panjang, manajemen risiko yang efektif, serta adaptasi terhadap perubahan pasar dan teknologi dalam membangun keunggulan kompetitif yang berkelanjutan.
... It contributes to the first among the aforementioned streams by providing a more detailed perspective about learning orientation importance as an antecedent of strategic flexibility and product innovation. In detail, it emerged how learning make reconfiguration easier, which in turn may drive product innovation through a different utilization of existing knowledge and resources (Teece, 2018). Then, it contributes to the second stream by stressing how collaborative processes deriving from learning orientation may support SMEs to maintain their competitiveness and overcome the limitations deriving from low resource levels or lack of structured innovation processes (Calantone et al., 2002;Chiva et al., 2010). ...
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Learning orientation emphasizes the importance of learning from any experience. It is grounded on commitment to learn, shared vision, open‐mindedness, and knowledge sharing. Organizational knowledge management literature based on social complexity theory posits that learning orientation makes companies generate new knowledge through spontaneous multi-level iterations and self-organization. Challenges related to the current business environment requires companies to constantly adjust to remain competitive. Still, the mechanisms making learning-oriented companies more capable to develop innovative product have been scantly explored. Pertinent literature actually conjectures this relationship as spontaneous, directed, and unmediated. Moreover, Small and Medium Enterprises (SMEs)rarely represent the context of analysis of research on this topic. Frequently lacking resources to systematically pursue product innovation, SMEs rely on solutions deriving from the combination of internal knowledge and external sources; thus, these companies depend on learning orientation principles to remain innovative. In this vein, the research aims to understand how learning orientation allows product innovation in SMEs through the achievement of strategic flexibility. Structural equation modelling was used to analyse data from 300 British SMEs. The results demonstrate the mediating role of strategic flexibility in the relationships between learning orientation and product innovation. The importance of innovation culture also emerged.
... Recent extensions of the RBV emphasize that, in dynamic environments, organizational capabilities like continuous innovation and interorganizational collaboration are essential for adaptation and survival (Felin and Powell 2016). Furthermore, dynamic capabilities-defined as the ability to integrate, build, and reconfigure internal and external competencies to address changing environments-are recognized as crucial for sustaining a competitive advantage over time (Teece 2018). ...
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The business behavior towards innovation and its impact on the creation of new jobs of 113 firms in the Valencian Community (Spain) were analyzed between 2014 and 2020. The sample included manufacturing, services and trading enterprises; technological and non-technological companies; micro-, small, medium, and large enterprises; and locations across the entire geographical extent of the Valencian Community. The firms were divided into quartiles based on their level of employment growth, linearly correlating this variable with 14 innovation indicators for each of the resulting four groups, reflecting the innovative capacity of these firms. It was found that the factor linked to innovation capacity that most favors or drives business employment creation is cooperation with other companies, as it had a direct and significant relationship with the two highest growth groups (quartiles 4 and 3), with no negative relationship with either of the two lower growth groups (quartiles 2 and 1). This suggests that the public administration should increase efforts to create spaces for the exchange of ideas between companies and organizations to reduce unemployment levels. Overall, this study provides new insights into the subject, and its findings lead to the conclusion that firms with higher innovative capacity create more jobs.
... Specifically, DC Theory argues that capabilities are dynamic, deeply embedded in organizations, and have a higher degree of inimitability and no substitutability. Moreover, the ability to exploit and reconfigure resources to match dynamic market conditions is linked to a firm's sustainable competitive advantage [25,26]. Teece [27] identified that dynamic capabilities coupled with a good strategy are necessary to sustain superior enterprise performance, especially in fast-moving global environments. ...
Article
Purposes of this study were to highlight the role of durian exporters’ marketing capabilities in achieving competitive advantage among Thai SMEs, and to describe the significance of a competitive advantage in achieving marketing goals by examining marketing capabilities. One hundred SME exporters were randomly selected from the list of firms listed on the Association of the Durian Exporters. Ninety-six questionnaires were included in this study. The PLS-SEM Program was used to analyze the collected data which was collected by using a mail questionnaire distributed to SME exporters. Results from data analysis were: 1) it indicated that all marketing capabilities, including product, price, distribution, and promotional capabilities, impacted competitive advantage; and 2) five competitive advantage forces were found to have statistically significant impacts. Moreover, the analysis confirmed that marketing capabilities and competitive advantages were related. Implications from this study were: 1) exporters find their endeavors to develop marketing strategies to achieve competitiveness in the global market; and 2) exporters could focus on distribution capabilities to survive and to expand their product to gain a competitive advantage in the marketplace. The limitation of this study was that this study did not involve quality assurance and variety of the durian, which would affect price capacity.
... This study used the Dynamic Capability Theories (DCT) which focus on the ability of a company or organization to respond quickly to external challenges [10]. Dynamic capabilities essentially enable organizations to adapt to a rapidly changing environment by coordinating and restructuring existing resources and capabilities to better capture and exploit market opportunities [11]. ...
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Today's business environment can be described as extremely turbulent and unpredictable due to numerous factors such as social, political and technological changes. Small and medium enterprises (SMEs) are no exception. The situation requires employers and employees to achieve a certain level of technological capabilities and innovativeness. Thus, this digital revolution brings about change, especially in risk management. This study, therefore, seeks to investigate the relationship between digital capabilities and enterprise risk management practice (ERMP) among small accounting firm owners in Malaysia. Online questionnaires were distributed to 341 accounting firm owners and top management who registered with the Malaysian Institute of Accountants database. 290 small accounting firm owners participated in this study. The results show a positive moderate relationship among digital capabilities variables (human, collaborative, innovation and technical capabilities) with the ERMP. However, only innovation capabilities significantly influence the ERMP in small accounting firms in Malaysia. The study is subject to limitations as only one sector of SME from the accounting industry has been examined and only focuses on digital capabilities as a factor that influences ERMP.
... Recent literature has expanded on the Resource-Based View (RBV) by integrating dynamic capabilities to explain how firms adapt and thrive in changing environments. (Teece, 2018) highlighted the importance of sensing, seizing, and transforming capabilities as essential to sustaining competitive advantage. ...
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The purpose of this research is to examine the impact of the strategic entrepreneurship, on sustainable competitive advantage in Egyptian's petrochemicals and energy sector. The study adopts the quantitative approach specifically for the verification of hypotheses, by using the questionnaire to collect data from a sample of 500 senior managers. The results reveal that there is a statistically significant correlation between the five variables strategic entrepreneurship under study, namely: continuous innovation, Opportunity-Based Mindset, Proactive Behavior, Risk Taking, Value Creation, and sustainable competitive advantage, as the correlation coefficient recorded a significant positive correlation between strategic entrepreneurship and sustainable competitive advantage, as it amounted to (0.687**). According to multiple regression analysis, the researchers found that value creation capabilities has a strong predictive value for competitive advantage and continuous innovation has the lowest predictive value, accordingly the study recommends that a more effective policy for enhancing strategic entrepreneurship generally and continuous innovation specifically should be formulated in Egyptian's petrochemicals and energy sector.
... Dynamic capabilities, essential for sustaining competitive advantage, are enhanced by an opportunity-based mindset, allowing firms to adapt and reconfigure resources in response to market changes (Teece, 2018). Recent research also explores the role of an opportunities-based mindset in fostering corporate entrepreneurship. ...
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This study investigates the impact of an opportunity-based mindset on sustainable competitive advantage in manufacturing sector in Egypt, additionally, the study highlights the critical mediating role of proactive behavior in this relationship. Data were collected from a sample of 385 senior managers, and the analysis was conducted using various Python packages. Structural equation modeling (SEM) techniques and a simple regression model were employed to examine the relationships between the constructs. The findings validate the significant contribution of both an opportunity-based mindset and proactive behavior to achieving sustainable competitive advantage. The Managers with a strong opportunity-based mindset are better equipped to identify and exploit market opportunities. However, the ability to convert these opportunities into a sustainable competitive edge is significantly enhanced when proactive behavior is present. This behavior, characterized by anticipation, initiative, and forward-thinking, is essential for translating potential opportunities into actionable strategies. The results emphasize the importance of fostering both an opportunity-based mindset and a culture of proactivity within organizations to secure long-term competitive advantages in manufacturing sector within Egypt.
... Dynamic capabilities, essential for sustaining competitive advantage, are enhanced by an opportunity-based mindset, allowing firms to adapt and reconfigure resources in response to market changes (Teece, 2018). Recent research also explores the role of an opportunities-based mindset in fostering corporate entrepreneurship. ...
Article
This study investigates the impact of an opportunity-based mindset on sustainable competitive advantage in manufacturing sector in Egypt, additionally, the study highlights the critical mediating role of proactive behavior in this relationship. Data were collected from a sample of 385 senior managers, and the analysis was conducted using various Python packages. Structural equation modeling (SEM) techniques and a simple regression model were employed to examine the relationships between the constructs. The findings validate the significant contribution of both an opportunity-based mindset and proactive behavior to achieving sustainable competitive advantage. The Managers with a strong opportunity-based mindset are better equipped to identify and exploit market opportunities. However, the ability to convert these opportunities into a sustainable competitive edge is significantly enhanced when proactive behavior is present. This behavior, characterized by anticipation, initiative, and forward-thinking, is essential for translating potential opportunities into actionable strategies. The results emphasize the importance of fostering both an opportunity-based mindset and a culture of proactivity within organizations to secure long-term competitive advantages in manufacturing sector within Egypt.
... This theory is pertinent to data integration techniques as it emphasizes the need for manufacturing industries to continuously adapt their data management strategies to maintain operational efficiency. By leveraging dynamic capabilities, firms can effectively integrate new data sources, adapt to technological advancements, and improve their operational processes (Teece, 2018). ...
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Purpose: The aim of the study was to assess the effect of data integration techniques on operational efficiency in manufacturing industries in Iran. Materials and Methods: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: The study found that by seamlessly amalgamating data from disparate sources across production lines, supply chains, and customer feedback systems, manufacturers have been able to streamline processes, optimize resource allocation, and achieve significant cost savings. For instance, real-time data integration facilitates timely decision-making, allowing for adaptive production planning and inventory management. Furthermore, the integration of advanced analytics and machine learning algorithms has enabled predictive maintenance strategies, reducing downtime and enhancing overall equipment effectiveness (OEE). These technological advancements not only bolster operational efficiency but also foster innovation, as companies leverage integrated data insights to drive continuous improvement initiatives and meet evolving consumer demands. Implications to Theory, Practice and Policy: Resource-based view (RBV), technology acceptance model and dynamic capabilities theory may be used to anchor future studies on assessing the effect of data integration techniques on operational efficiency in manufacturing industries in Iran. Manufacturing firms should prioritize strategic implementation plans for data integration technologies to ensure that investments in IoT, AI, ETL, data warehousing, data virtualization, and APIs are aligned with their overall business objectives. Policymakers should provide incentives and support for the adoption of advanced data integration technologies in the manufacturing sector.
... Meadows (2008, p. 205) defines a "system" as "[a] set of elements or parts that is coherently organized and interconnected in a pattern or structure that produces a characteristic set of behaviour." Systems theory in organisational science is an antecedent of dynamic capabilities theory and understands organisations as social systems comprising subunits that interrelate congruously and harmoniously, supporting the organisation's effectiveness (Teece, 2018). ...
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Organisational agility is crucial for organisations to thrive in dynamic business environments. While the Information Systems (IS) discipline recognises the need for IS to support organisational agility, current IS research has not sufficiently explained how organisations achieve agility given their sociotechnical contexts. Some scholars and practitioners propose scaling agility-building approaches from small software development teams to the enterprise level, and others argue that agility is not a predetermined outcome of linear processes, but instead emerges from intricate organisational contexts. Previous research proposed a conceptual model that identified the structural components of agility in IS. However, this structural perspective does not address the dynamic aspects of agility. To address this gap, two systematic literature reviews (SLR) were conducted to develop a conceptual framework for agility in sociotechnical contexts, which is the contribution this research makes to the IS field. The first SLR investigated frameworks that enable organisational agility. Consequently, the Cynefin framework was adopted to explain the dynamics of contextualised decision-making and agility. The second SLR identified the influence of heuristics on decision-making and dynamic capabilities. The resulting framework integrates the structural and dynamic aspects of agility in IS and explains how heuristics could potentially be managed to improve sociotechnical agility.
... While this perspective is valuable, it glosses over the practical difficulties in developing and deploying dynamic capabilities, especially in sectors with limited resources or strict regulations. Furthermore, the claim that GSA provides the direction and PES, as a dynamic capability, enables firms to restructure resources and processes (Lin & Wu, 2014;Teece, 2018) and is excessively optimistic. It undervalues the resistance to change and the unwillingness prevalent in many organizations. ...
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This study investigates the impact of green strategic alignment (GSA) and top management green support (TMGS) on green operational performance (GOP) within the UAE's Information and Communication Technology (ICT) sector, focusing on the mediating role of proactive environmental strategy (PES) and the moderating effect of green psychological perception (GPP). Employing a quantitative approach through surveys, data were collected from employees at various ICT companies within the UAE who are directly involved in operations that pertain to environmental strategies. This method ensures a comprehensive understanding from those who engage daily with the company's green policies. Using Partial Least Squares Structural Equation Modeling, the research provides empirical evidence on how strategic orientations and management support contribute to environmental sustainability. The findings reveal that both GSA and TMGS positively influence PES, which in turn enhances GOP. Furthermore, GPP significantly strengthens the relationship between PES and GOP, offering deeper insights into the dynamics of strategic management and sustainability in the services industry. This research is pioneering within the region, introducing empirical data on the synergy between management support and PESs, and it highlights the significant enhancement of operational performance through these combined efforts. This not only supports the theoretical frameworks but also provides actionable insights for firms aiming to enhance their green initiatives.
... The relevance of DCT arises within the textile sector, where firms encounter a range of environmental challenges, regulatory modifications, and customer demands pertaining to sustainability. This theory facilitates the comprehension of how textile firms can cultivate dynamic capabilities to effectively incorporate sustainability practices into their HRM and SCM strategies [57]. By adopting a dynamic capabilities approach, textile firms can improve their ability to meet sustainability demands and optimize their resources and competencies to achieve superior TBL performance. ...
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The textile industry of Pakistan, a major contributor to its economy, is encountering serious sustainability challenges, akin to many developing nations. The literature is replete with assertions on the importance of sustainability; however, cross-functional research is sporadic. This paper theoretically links Green HRM (GHRM) practices, Green SCM (GSCM) practices, and Triple Bottom Line (TBL) performance within this context. In scaffolding through Resource Orchestration (ROT) and Dynamic Capabilities (DCT) theories, a conceptual framework is proposed. We posit that GSCM transforms GHRM practices into tangible, eco-friendly supply chain activities resulting in enhanced sustainable performance, thereby playing a mediating role. Additionally, a unique interplay of Entrepreneurial Orientation (EO) as a moderator between GHRM and GSCM is introduced. Firms with higher levels of EO employ innovative approaches to implement GHRM practices into their supply chain strategies, leading to robust GSCM initiatives. The literature review indicates that research on the synergistic effects of GHRM and GSCM on TBL performance in developing nations is scarce. The study warrants carrying out empirical validation and provides a clear plan for future research. The exclusive emphasis on Pakistan’s textile industry introduces contextual intricacies, facilitating a profound comprehension for implementing sustainable practices within the constraints and opportunities of an emerging economy.
... Dynamic capabilities (DC) refer to the processes and procedures embarked upon by a firm in exploiting new opportunities (Yeow et al., 2018) and it occurs through changes in business models (Sahebalzamani et al., 2022) as well as a strategic reformulation of how a given situation is conceived within an organisation (Reuter & Krauspe, 2022). While DC has been recognised as essential to firm's value proposition (Schmidt & Scaringella, 2020), three key elements of DC are germane to analysing innovations developed by firms, these include resources, strategies, and capabilities (Teece, 2018) and network capabilities have been established as germane to creating an environmentally efficient BMI (Li et al., 2023). Recent trends in information research reveal that technology embeddedness, agility, ambidexterity, and absorptive capacity are part of the dynamic capabilities that could birth BMI for a firm (Steininger et al., 2022). ...
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The rising competition among firms necessitates new ways of doing business, especially in this digital era. This is fundamentally true of logistics companies as they strive to innovate their business models using digital technologies. Nevertheless, the dynamic competence gained by logistics firms while using digital technologies for BMI has not received sufficient research attention. Driven by the expedient research question, how do firms leverage digital technologies to develop dynamic capabilities for BMI, this study teases out the pathways to BMI by investigating how logistics companies engage digital resources to gain dynamic capabilities. Following the procedures established in Gioia methodology, we perform thematic analysis on qualitative data from the whitepapers of 20 logistics companies prominent for technology-enabled business models. Results reveal that while engaging digital technologies for their business processes, logistics businesses and their managers can sense opportunities for business expansion; seize these opportunities by mobilizing digital resources as well as reconfigure their processes to continue to take advantage of the recognized opportunities. Our results contribute to the dynamic capabilities theory by building on its core arguments to explicate the theoretical foundations of BMI development. Additionally, three propositions emerge regarding the sources of dynamic capabilities in the utilization of digital technologies by digital logistics.
... These organizations can also respond by altering their organizational, managerial, and technological processes to remain competitive. Therefore, dynamic capabilities act as a mediator between environmental conditions and the achievement of competitive advantage (Teece, 2018;Teece et al., 1997). Based on these insights, we develop the following hypothesis: ...
... Dynamic capabilities are part of a system that includes resources and strategy. They determine the degree of competitive advantage an enterprise can gain over its rivals (Teece, 2018). ...
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Despite soaring interest in Artificial Intelligence (AI), only one-tenth of companies have reported tangible business results. We conducted a Systematic Literature Research on peer-reviewed reports to establish an updated status and baseline of AI deployment for research and companies. We analysed selected peer-reviewed articles for deployment objectives, approaches, results, and learnings. This research confirms that AI is still at the early stages of deployment and innovation in companies. Deploying AI successfully represents a management — rather than a technology — challenge. It requires more cognisance, innovation, learning, and effort than generally thought. Through the results and a novel conceptual framework, this research increases the knowledge and emphasises the importance of the pre-deployment from theoretical and practical viewpoints. The Sensing stage of the Dynamic Capability theory aligns well with the developed pre-deployment concept. We propose several research topics to increase the knowledge and theoretical understanding of deploying AI cognisably for business and stakeholder benefits.
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Purpose The purpose of the study is to enhance the extant empirical and conceptual understanding of Industry 4.0 (I4.0) adoption and its repercussions for an organisation operating in an emerging economy, considering the dynamic capabilities framework. The study investigates (1) the potential impact of the I4.0 phenomenon on relationships between organisations and industry actors, (2) the existing effects of I4.0 on these relationships and (3) the necessary measures for organisations to unlock the full potential of I4.0 in order to enhance and reinforce these relationships. Design/methodology/approach A qualitative method was used. Semi-structured, open-ended face-to-face and online interviews were conducted with 18 directors, managers and chief executive officers (CEOs) of Savico, a leading Vietnamese car dealership. Findings The analysis revealed various dimensions highlighting impacts on organisation–industry actor relationships. For instance, the “enhancing internal/external operations” dimension highlights the significance of benefitting the company’s close stakeholders through a centralised management system or more advanced functions, while the empowering-nimble outcomes dimension underlines the benefits of I4.0 in enabling performance-based choices and staff empowerment. Practical implications Technological phenomena such as the I4.0 regime require constant adaptive strategies, including knowledge acquisition and talent development. Thus, the study has implications for industry stakeholders, including companies, educational institutions and government agencies. Originality/value The study’s key value lies in proposing a model that provides conceptual depth into organisation–industry actor relationships. Furthermore, both the analysis and the model can guide researchers in future attempts to examine dynamic capabilities among firms operating in emerging economies, with important practical and theoretical implications.
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This paper combines a resource-based perspective with a dynamic, evolutionary perspective to study firm and industry evolution. The technological competencies of firms and the technological requirements of products are projected onto a map of technology space where respective positions can be studied as a function of time. The potential of the developed approach is demonstrated by shedding new light on the mobile phone industry from 1993 to 2012, comparing new entrants Apple and Google with incumbents Ericsson, Motorola, Nokia, and RIM. Findings highlight the importance of firms’ abilities to orient and situate themselves in their dynamic environments and to recognize and act upon opportunities and threats that result from evolving technological supply and demand.
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The rise of big data analytics has become crucial in aiding firms facing sustainability challenges,prompting researchers and practitioners to explore how this technology can contribute to environmental sustainability performance under specific circumstances. Based on the resource-based and dynamic capabilities view theory lens, it uses partial least square structural equation modeling and qualitative comparative analysis to explore the contribution of big data analytics- driven dynamic capabilities in innovation on environmental performance under enterprise factors and combinations of conditions. The empirical study gathered data from 319 Indian and American enterprises. The results demonstrate seven solutions with very high environmental performance, depicting core presence for big data analytics-driven dynamic capabilities in sensing, seizing, and transforming in an uncertain environment of dynamism and hostility in India and American firms. The synergy of big data analytics-enabled dynamic capabilities in sensing, seizing, and transforming shows an essential role in enhancing sustainable environmental performance for enterprises in the USA compared to those in India. Based on the configuration analyses, big data analytics significantly mitigates environmental dynamism and hostility challenges enterprises encounter. It consequently exerts a more pronounced influence on green performance, particularly within the service sector and small enterprises in the USA, through radical process innovation. Conversely, this impact is observed primarily among large product firms in India by incremental innovation strategies. This indicates that this emerging technology is essential to attend to the necessary aspects of the circular economy in developing and developed economies through specific configuration conditions.
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This review paper critically examines the role of strategic innovation in business models, with a focus on how emerging technologies can be leveraged to gain a competitive advantage. By synthesizing existing literature, the paper explores the transformative potential of technologies such as artificial intelligence, blockchain, and the Internet of Things (IoT) on traditional and contemporary business models. The review identifies key patterns and trends in how businesses across various industries are integrating these technologies to enhance their value propositions, streamline operations, and create new revenue streams. The findings suggest that companies that successfully incorporate emerging technologies into their business models are better positioned to outpace competitors and adapt to the rapidly changing market landscape. The paper also discusses the challenges and barriers to technology adoption, such as high implementation costs, skill gaps, and organizational inertia, offering insights into strategies that can mitigate these obstacles. The paper underscores the importance of strategic innovation as a critical driver of sustained competitive advantage in the digital era. It highlights that leveraging emerging technologies is not merely an option but a strategic necessity for businesses aiming to thrive amidst ongoing technological disruption. By embracing these innovations, companies can significantly transform their business models, unlock new opportunities, and secure long-term success. Keywords: Business Model Innovation, Emerging Technologies, Sustainable Practices, Strategic Innovation, Partnerships, Open Innovation, Circular Economy, Organizational Agility, Continuous Improvement, Competitive Advantage, Digital Transformation, Market Adaptation, Technological Integration, Collaborative Innovation, Resilient Business Models.
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The promotion of social innovations by non-profit and business organizations has gained increasing interest. Yet, there has been limited research on routines that organizations use to facilitate social innovations. This paper uses a dynamic capabilities framework to understand the microfoundations of dynamic capabilities for social innovation in small non-profit organizations. Through analysis of routines of 20 small organizations in five European metropolitan areas, the paper demonstrates that many microfoundation aspects resemble generic abilities of opportunity identification, alliancing, user engagement, networking, and organizational learning. However, their orientation toward public values requires incorporating commitments to social value and principles of ethics, responsibility, and sustainability, into different organizational processes. We suggest that social impact does not always require substantial investment and can be achievable through modest changes such as repurposing surplus resources. Building flexible routines that enable such incremental changes is a key element of organizational capability to adapt to changing contexts.
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Recently, there has been a surge of interest in developing innovation ecosystems within targeted industry sectors to enhance national industry capabilities. However, academic discussions on innovation ecosystems within a sectoral context are notably lacking. Past research has primarily focused on innovation ecosystems centered around a single organization, initiated and led by the same organization. This study aims to address this gap by examining the enablers of sectoral innovation ecosystems (SIE) development. A systematic literature review was conducted using 57 empirical studies from the Web of Science database between 2010-2023. The study proposes a conceptual framework with three critical enablers for developing SIE: (1) Structural configurations (structural constructs and structural alignment), (2) capabilities (organizational capabilities and ecosystem capabilities), and (3) interactions (nature of interactions and drivers of interactions). This framework provides a comprehensive understanding of how sectoral innovation ecosystems can be structured and managed to enhance industry capabilities. The study underscores the pivotal role of intermediary organizations in orchestrating SIE development, highlighting their importance in facilitating interactions and aligning structures within the ecosystem. By advocating for the complementary use of structure-based and coevolution-based approaches, the study offers a dual perspective that enriches the theoretical understanding of SIE. The systematic literature review concludes with recommendations for future research, providing a pathway for further exploration of SIE.
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Purpose This paper aims to initiate new avenues of research by examining optimal intellectual capital (IC) inputs, introducing three theories into the discussion: diminishing returns to scale, transaction costs economics and efficiency wage theory. In the second part, it advocates for demonstrating the existence of such non-optimality through empirical tests. Design/methodology/approach This paper is divided into two parts. The first part provides a theoretical justification for the necessity of observing nonlinear relationships between IC inputs and firm performance. In the empirical section, the research design follows a four-step process, each progressively building on insights gained from the preceding phase: (1) establishing a baseline linear regression model; (2) introducing the logarithm of the IC inputs; (3) incorporating the square terms of the IC inputs and (4) investigating the phenomena of over- and under-input in IC. Findings The background theories and the obtained results highlight the necessity for firms to adopt a strategic approach to IC, acknowledging the diverse effects of IC components on different outcomes. They emphasize the nonlinear nature of IC returns, underscoring the importance of investing up to an optimal level to maximize benefits. Practical implications The study’s discovery of optimal levels for the components of IC highlights the importance for practitioners to identify and invest up to these optimal levels. This ensures that IC initiatives are strategically aligned to maximize their positive impact on firm performance. Originality/value The integration of theories such as diminishing returns to scale, transaction costs economics and efficiency wage theory, alongside traditional frameworks like the resource-based view, the theory of dynamic capabilities and the knowledge-based theory of the firm, opens up new avenues for research on IC. The proposed methodology and measures – from financial reports – provide opportunities for replicating this type of study.
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The aims of this chapter are to systematically review the development of the literature on a roadmap framework based on resilience and the recovery of MSMEs from the crisis that emerged due to the COVID-19 pandemic. In addition, this research is used to identify research topics that must be carried out and research opportunities in the future. A systematic literature review was performed, analyzing studies related 158 to COVID-19, MSMEs or SMEs, and resilience. The authors propose a resilience roadmap during the crisis with a recovery-based framework for reviving the MSMEs post COVID-19. The roadmap outlines six prominent resources or clusters for building resilience processes: health capital, psychological capital, human capital, social capital, technological capital, and economics capital through six applications of resilience capital and grouped into two strategies recovery-based framework. They argue that by using a resilience roadmap with a recovery-based framework that is inclusive, the MSMEs may transform into a new global economy with make policies to respond to the crisis.
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Purpose of the Study: The study aimed to assess the dynamic capabilities and competitive advantage of telecommunications companies in Kenya, investigating the impact of sensing, seizing, and reconfiguration capabilities on firm competitiveness within the sector. Findings: The research revealed that sensing and seizing capabilities are crucial for a firm's competitive advantage in the telecommunications industry. Additionally, factors such as adaptability, innovation, learning, development, and resource mobilization were identified as key elements influencing a company's competitive edge. Conclusion: The study concludes that to sustain a competitive advantage in the telecommunications sector, firms need to prioritize the development and deployment of dynamic capabilities, including sensing, seizing, and reconfiguration. Attention to factors such as adaptability, innovation, learning, and resource mobilization is essential for maintaining competitiveness in this dynamic industry. Recommendation: The study recommends that telecommunications firms in Kenya focus on enhancing their dynamic capabilities, particularly in sensing, seizing, and reconfiguration. Moreover, attention should be given to fostering adaptability, innovation, learning, development, and effective resource mobilization strategies to sustain and strengthen their competitive advantage in the market. Additionally, future research should explore the development of parallel strategic practices and organizational techniques to further enhance competitiveness in the telecommunications industry.
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Purpose This conceptual paper aims to contribute to a better understanding of value creation and value capture with smart resources in the Internet of Things (IoT)-driven business models against the backdrop of an increasingly networked and connectivity-based environment. More specifically, the authors screen strategic management theories and adapt them to the specificities of new types of smart resources by focusing on a conceptual analysis of isolating mechanisms that enable value creation and value capture based upon different types of smart resources. Design/methodology/approach By adapting the state of the art of the contemporary resource-based discussion (resource-based view, dynamic capabilities view, relational view, resource-based view for a networked environment) to the context of IoT-driven business models, the paper typifies valuable intra- and inter-organisational resource types. In the next step, a discursive discussion on the evolution of isolating mechanisms, which are assumed to enable the translation of value creation into value appropriation, adapts the resource-based view for a networked environment to the context of IoT-driven business models. Findings The authors find that connectivity shapes both opportunities and challenges for firms, e.g. focal firms, in such business models, but it is notably social techniques that help to generate connectivity and transform inter-organisational ties into effective isolating mechanisms. Originality/value This paper lays a foundation for a theoretically underpinned understanding of how IoT can be exploited through designing economically sustainable business models. In this paper, research propositions are established as a point of departure for future research that applies strategic management theories to better understand business models that work with the digitisation and connectivity of resources on different levels.
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Purpose-This conceptual paper aims to contribute to a better understanding of value creation and value capture with smart resources in the Internet of Things (IoT)-driven business models against the backdrop of an increasingly networked and connectivity-based environment. More specifically, the authors screen strategic management theories and adapt them to the specificities of new types of smart resources by focusing on a conceptual analysis of isolating mechanisms that enable value creation and value capture based upon different types of smart resources. Design/methodology/approach-By adapting the state of the art of the contemporary resource-based discussion (resource-based view, dynamic capabilities view, relational view, resource-based view for a networked environment) to the context of IoT-driven business models, the paper typifies valuable intra-and inter-organisational resource types. In the next step, a discursive discussion on the evolution of isolating mechanisms, which are assumed to enable the translation of value creation into value appropriation, adapts the resource-based view for a networked environment to the context of IoT-driven business models. Findings-The authors find that connectivity shapes both opportunities and challenges for firms, e.g. focal firms, in such business models, but it is notably social techniques that help to generate connectivity and transform inter-organisational ties into effective isolating mechanisms. Originality/value-This paper lays a foundation for a theoretically underpinned understanding of how IoT can be exploited through designing economically sustainable business models. In this paper, research propositions are established as a point of departure for future research that applies strategic management theories to better understand business models that work with the digitisation and connectivity of resources on different levels.
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The carded wool process, that means regenerated wool, is rooted in Prato where industry has been for centuries specialised in the recycling of ‘rags’. Local companies put by-products on value with very low production costs, obtaining wearable soft wool fabrics. The chapter benefits from a couple of decades of research undertaken by the authors on the textile district of Prato, analysing the system of small laboratories based on a secular ‘re-use concept’. The main research purpose is to have a deeper understanding of the carded cycle to catch the key factors that could improve firms’ economic performance. Meanwhile it is rising a textile slowdown in the market demand. The research attempts to explore emerging ‘economies’ intrinsically connected with the reuse of the elements in each phase of the carded wool recycling process. The empirical findings address the classification and description of specific sector’s scope economies triggered throughout the carded circular process. Local entrepreneurs that manufacture relying on the historical production routine seem not to be conscious at all to generate valuable scope economies along the productive cycle. Therefore, firms do not consider them on company accountability and economic results. Updated managerial and organisational capabilities would enable to strengthen firms’ competitive advantage matching both the secular recycling process and the imperative of consumerism in supplying sustainable fabrics.
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The development rapidly growing of the Indonesian food and beverage industry increases the risk of business competition. To develop and overcome the food and beverage industry, Laoban Surabaya must have the advantage of being a kopitiam shop. The aim of this research is to cover all components that can influence customer satisfaction. Qualitative research uses interviews to collect data. The data analysis method used was data reduction and drawing conclusions, with eight respondents being owners and visitors to Laoban Surabaya. The research results show that product quality, price and service are three components that influence customer satisfaction. In terms of product quality, providing high quality food and drinks with unique flavors that can be enjoyed by everyone. In terms of price, affordable price offers start from IDR 10,000 to IDR 50,000. In terms of service quality, ensuring customer comfort, friendly and alert service, and fast service.
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Business models, dynamic capabilities, and strategy are interdependent. The strength of a firm's dynamic capabilities help shape its proficiency at business model design. Through its effect on organization design, a business model influences the firm's dynamic capabilities and places bounds on the feasibility of particular strategies. While these relationships are understood at a theoretical level, there is a need for future empirical work to flesh out the details. In particular, studies that provide a better understanding of business model innovation, implementation, and change will also shed light on important aspects of dynamic capabilities.
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As a potential theory, the elemental resource-based view (RBV) is not currently a theoretical structure. Moreover, RBV proponents have assumed stability in product markets and eschewed determining resources' values. As a perspective for strategic management, imprecise definitions hinder prescription and static approaches relegate causality to a "black box." We outline conceptual challenges for improving this situation, including rigorously formalizing the RBV, answering the causal "how" questions, incorporating the temporal component, and integrating the RBV with demand heterogeneity models.
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This paper discusses the intellectual roots of the dynamic capabilities framework. We draw on insights from Edith Penrose as well as others in order to help explain the essence of the business enterprise, and how it can escape the zero profit trap. We see the business enterprise as being in part a product of its own history, but not completely so. Managers can shape outcomes and are not completely trapped by prior decisions and investments. We call this 'evolution with design', leaving room for both evolutionary processes as well as intentional design. This conclusion is consistent with Penrose's contributions to the theory of the firm.
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This paper argues that chaos theory provides a useful theorectical framework for understanding the dynamic evolution of industries and the complex interactions among industry actors. It is argued that industries can be conceptualized and modeled as complex, dynamic systems, which exhibit both unpredictability and underlying order. The relevance of chaos theory for strategy is discussed, and a number of managerial implications are suggested. To illustrate the application of chaos theory, a simulation model is presented that depicts the interactions between a manufacturer of computers, its suppliers, and its market. The results of the simulation demonstrate how managers might underestimate the costs of international production. The paper concludes that, by understanding industries as complex systems, managers can improve decision making and search for innovative solutions.
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This article contrasts the assumptions of General Systems Theory, the framework for much prior leadership research, with those of Complexity Theory, to further develop the latter's implications for the definition of leadership and the leadership process. We propose that leadership in a Complex Adaptive System (CAS) may affect the organization indirectly, through the mediating variables of organizational identity and social movements. A rudimentary model of leadership in a CAS is presented. We then outline two non-linear methodologies, dynamic systems simulation and artificial neural networks, as appropriate to enable development and testing of a model leadership under the assumptions of Complexity Theory.
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This paper discusses some developments in the theory of the organizational capabilities of the business enterprise. Antecedents are recognized, and some promising new developments and areas for future research are identified. The role of managers in the economic system is highlighted and discussed within the context of economic and organizational research. Suggestions for future developments of dynamic capability research involve employment of evolutionary and behavioral theories.
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This paper focuses on dynamic capabilities and, more generally, the resource‐based view of the firm. We argue that dynamic capabilities are a set of specific and identifiable processes such as product development, strategic decision making, and alliancing. They are neither vague nor tautological. Although dynamic capabilities are idiosyncratic in their details and path dependent in their emergence, they have significant commonalities across firms (popularly termed ‘best practice’). This suggests that they are more homogeneous, fungible, equifinal, and substitutable than is usually assumed. In moderately dynamic markets, dynamic capabilities resemble the traditional conception of routines. They are detailed, analytic, stable processes with predictable outcomes. In contrast, in high‐velocity markets, they are simple, highly experiential and fragile processes with unpredictable outcomes. Finally, well‐known learning mechanisms guide the evolution of dynamic capabilities. In moderately dynamic markets, the evolutionary emphasis is on variation. In high‐velocity markets, it is on selection. At the level of RBV, we conclude that traditional RBV misidentifies the locus of long‐term competitive advantage in dynamic markets, overemphasizes the strategic logic of leverage, and reaches a boundary condition in high‐velocity markets. Copyright © 2000 John Wiley & Sons, Ltd.
Article
This paper focuses on dynamic capabilities and, more generally, the resource-based view of the firm. We argue that dynamic capabilities are a set of specific and identifiable processes such as product development, strategic decision making, and alliancing. They are neither vague nor tautological. Although dynamic capabilities are idiosyncratic in their details and path dependent in their emergence, they have significant commonalities across firms (popularly termed ‘best practice’). This suggests that they are more homogeneous, fungible, equifinal, and substitutable than is usually assumed. In moderately dynamic markets, dynamic capabilities resemble the traditional conception of routines. They are detailed, analytic, stable processes with predictable outcomes. In contrast, in high-velocity markets, they are simple, highly experiential and fragile processes with unpredictable outcomes. Finally, well-known learning mechanisms guide the evolution of dynamic capabilities. In moderately dynamic markets, the evolutionary emphasis is on variation. In high-velocity markets, it is on selection. At the level of RBV, we conclude that traditional RBV misidentifies the locus of long-term competitive advantage in dynamic markets, overemphasizes the strategic logic of leverage, and reaches a boundary condition in high-velocity markets. Copyright © 2000 John Wiley & Sons, Ltd.
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"Organizational agility" is often treated as an immutable quality, implying that firms need to be in a constant state of transformation. However, this ignores that such transformations, while often essential, come at a cost. They are not always necessary, and may not even be possible. This article explores agility at a more fundamental level and relates it more specifically to dynamic capabilities. It demonstrates that it is first essential to understand deep uncertainty, which is ubiquitous in the innovation economy. Uncertainty is very different from risk, which can be managed using traditional tools and approaches. Strong dynamic capabilities are necessary for fostering the organizational agility necessary to address deep uncertainty, such as that generated by innovation and the associated dynamic competition. This article explores the mechanisms by which managers may calibrate the required level of organizational agility, deliver it cost effectively, and relate it to strategy. © 2016 by The Regents of the University of California. All rights reserved.
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The dynamic capabilities framework analyzes the sources and methods of wealth creation and capture by private enterprise firms operating in environments of rapid technological change. The competitive advantage of firms is seen as resting on distinctive processes (ways of coordinating and combining), shaped by the firm's (specific) asset positions (such as the firm's portfolio of difficult-to-trade knowledge assets and complementary assets), and the evolution path(s) it has adopted or inherited. The importance of path dependencies is amplified where conditions of increasing returns exist. Whether and how a firm's competitive advantage is eroded depends on the stability of market demand, and the ease of replicability (expanding internally) and imitatability (replication by competitors). If correct, the framework suggests that private wealth creation in regimes of rapid technological change depends in large measure on honing internal technological, organizational, and managerial processes inside the firm. In short, identifying new opportunities and organizing effectively and efficiently to embrace them are generally more fundamental to private wealth creation than is strategizing, if by strategizing one means engaging in business conduct that keeps competitors off balance, raises rival's costs, and excludes new entrants. © 2003 by World Scientific Publishing Co. Pte. Ltd. All rights reserved.
Conference Paper
This paper focuses on dynamic capabilities and, more generally, the resource-based view of the firm. We argue that dynamic capabilities are a set of specific and identifiable processes such as product development, strategic decision making, and alliancing. They are neither vague nor tautological. Although dynamic capabilities are idiosyncratic in their details and path dependent in their emergence, they have significant commonalities across firms (popularly termed 'best practice'). This suggests that they are more homogeneous, fungible, equifinal and substitutable than is usually assumed. In moderately dynamic markets, dynamic capabilities resemble the traditional conception of routines. They are detailed, analytic stable processes with predictable outcomes. In contrast, in high-velocity markets, they are simple, highly experiential and fragile processes with unpredictable outcomes. Finally, well-known learning mechanisms guide the evolution of dynamic capabilities. In moderately dynamic markets, the evolutionary emphasis is on variation. In high-velocity markets, it is on selection. At the level of REV, we conclude that traditional REV misidentifies the locus of long-term competitive advantage in dynamic markers, overemphasizes the strategic logic of leverage, and reaches a boundary condition in high-velocity markets. Copyright (C) 2000 John Wiley & Sons, Ltd.
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Attempts by organizational researchers to conceptualize and explicate the concepts of technology and structure have been subject to inconsistencies and misspecifications. These problems stem from the absence of an integrative framework that considers these concepts simultaneously. Such a framework is developed here, rooted both in the theoretical work on technology and structure and in systems theory. This framework specifies the qualitatively different components that constitute technology in organizations, the hierarchical arrangement of these components, and the nature of organizational structuring. The components considered are those associated with the concrete (living and nonliving), the abstract, and the activity systems that characterize organizations. These system components are integrated into a model of technology and structure. Implications of this model for the management of technological and structural change are discussed.
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Mainstream economic theory has generally excluded consideration of the role of managers, which has, in turn, impaired its ability to explain resource allocation by, and heterogeneity among, firms. In the real world, managers are called on to fill entrepreneurial and leadership roles: sensing opportunities, developing and implementing viable business models, building capabilities, and guiding the organization through transformations. These entrepreneurial management tasks are part of the organization's capabilities, which also encompass embedded organizational processes that can be slow to change. An understanding of entrepreneurial management and organizational capabilities will contribute to more realistic economic models and a better understanding by policy makers of industrial dynamics and the requirements of innovation.
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The dynamic capabilities framework has had a significant impact on strategic management theory and practice, but the sizable literature on the topic has not always been unified. This paper begins with a restatement of the framework encompassing clarifications and extensions that have occurred since it was introduced. The paper highlights key elements that have been omitted or poorly integrated into the dynamic capabilities literature: the role of individual action by entrepreneurial managers, the role of resources, strategy, and the distinction between ordinary and dynamic capabilities. Dynamic capabilities is advanced as a multidisciplinary framework to explain long-run enterprise performance. Ambidexterity and other related frameworks are tailored versions of dynamic capabilities. Linkages between (strategic) management theory and (Austrian) economic theory are explored. The concepts of x-inefficiency and d-ineffectiveness are compared.
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Understanding sources of sustained competitive advantage has become a major area of research in strategic management. Building on the assumptions that strategic resources are heterogeneously distributed across firms and that these differences are stable over time, this article examines the link between firm resources and sustained competitive advantage. Four empirical indicators of the potential of firm resources to generate sustained competitive advantage-value, rareness, imitability, and substitutability are discussed. The model is applied by analyzing the potential of several firm resources for generating sustained competitive advantages. The article concludes by examining implications of this firm resource model of sustained competitive advantage for other business disciplines.
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The firm is the central actor for the effectuation of innovation and technological change. The large industrial laboratories of the previous century have given way to more organizationally and geographically diffuse sources of technology, placing even greater emphasis on the coordination skills of managers. Dynamic capabilities are the skills, procedures, organizational structures, and decision rules that firms utilize to create and capture value. Managers must be able to sense opportunities, craft a business model to capitalize on them, and reconfigure their organizations, and sometimes their industries, as the business environment and technology shift. The key employees in this regard are experts (literati and numerati), whose management requires limited hierarchy, flexible teams, and performance-based incentives. To encompass these realities, the theory of the firm needs to be augmented to account for opportunity as well as opportunism, coordination beyond the boundaries of the firm as well as within it, variations in the level of capability across firms, and the frequent superiority of the firm over markets for the creation, transfer, and protection of intangible assets. Complementarities and cospecialization are advanced as two emerging concepts of particular relevance to a theory of the innovating enterprise earning above-normal returns.
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This article outlines a capabilities-enriched economic theory of the firm and its sources of competitive advantage. The nature and key categories of intangibles are discussed, with an emphasis on their suitability for providing differentiation in an era when so many services and tangible goods are readily available on a global basis. The linkages in the conversion of intangibles into profits are analyzed, including the frequent need for co-specialized complements. Among the key categories of intangibles are organizational capabilities, which can be either ordinary or dynamic. Ordinary capabilities are, generally, those that can be measured against best practice and with some effort, imitated by rivals. Dynamic capabilities, which reside in both signature processes and management skills, allow the enterprise and its top management to develop conjectures about the evolution of consumer preferences, business problems, markets, and technology; validate them; and realign assets and competences to enable continuous innovation for the creation of competitive advantage. The key concepts of complementarity, entrepreneurial management, and dynamic capabilities are then applied to deepening the economic theory of the firm, combining with the dominant transaction cost approach to provide a richer understanding of why firms are needed in the economic system.
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Even though everyone is talking about it, there is no concept in business today more muddled than 'strategy'. Richard Rumelt, described by McKinsey Quarterly as 'a giant in the field of strategy' and 'strategy's strategist', tackles this problem head-on in a jargon-free explanation of how to develop and take action on strategy, in business, politics and beyond. Rumelt dispels popular misconceptions about strategy - such as confusing it with ambitions, visions or financial goals - by very practically showing that a good strategy focuses on the challenges a business faces, and providing an insightful new approach for overcoming them. His sharp analysis and his brilliant, bold style make his book stand out from its competitors (something that Rumelt himself says is crucial). Rumelt has always challenged dominant thinking, ever since, in 1972, he was the first person to uncover a statistical link between corporate strategy and profitability - and this is his long-awaited tour de force.
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Two mistaken beliefs have appeared repeatedly in the organization theory literature concerning application of the systems paradigm to organizations. This paper identifies and corrects these beliefs. Three opportunities for using the systems paradigm to further the development of organization theory have been overlooked. The paper identifies these opportunities and suggests how they can be exploited. Finally, the authors note that recent advances in organization theory could enrich the paradigm, making it more useful for organization research.
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A number of proposals have been advanced in recent years for the development of “general systems theory” which, abstracting from properties peculiar to physical, biological, or social systems, would be applicable to all of them. We might well feel that, while the goal is laudable, systems of such diverse kinds could hardly be expected to have any nontrivial properties in common. Metaphor and analogy can be helpful, or they can be misleading. All depends on whether the similarities the metaphor captures are significant or superficial.
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If the defining goal of modern-day business can be isolated to just one item, it would be the search for competitive advantage. Competition is more intense than ever-technological innovation, consumer expectations, and government deregulation all combine to create more opportunities for new competitors to change the basic rules of the game. At the same time, most of the old reliable sources of competitive advantage are drying up: the strategies employed by GM, IBM, and AT&T to maintain their positions of dominance in the 1960s and 70s are now obsolete. The authors of this book argue that the last remaining source of truly sustainable competitive advantage lies in "organizational capabilities": the unique ways each organization structures its work and motivates its people to achieve clearly articulated strategic objectives. The book argues that managers must understand the concepts and learn the skills involved in designing their organization to exploit their inherent strengths. All the reengineering, restructuring, and downsizing in the world will merely destabilize a company if the change doesn't address the fundamental patterns of performance-and if the change doesn't recognize the unique core competencies of that company. The authors draw upon specific cases to illustrate the design process in practice, and they provide a set of tools for using strategic organization design to gain competitive advantage. They present a design process, explore key decisions managers face, and list the guiding principles for incorporating the design function as a continuing and integral process.
Article
The dynamic capabilities framework analyzes the sources and methods of wealth creation and capture by private enterprise firms operating in environments of rapid technological change. The competitive advantage of firms is seen as resting on distinctive processes (ways of coordinating and combining), shaped by the firm's (specific) asset positions (such as the firm's portfolio of difftcult-to- trade knowledge assets and complementary assets), and the evolution path(s) it has aflopted or inherited. The importance of path dependencies is amplified where conditions of increasing retums exist. Whether and how a firm's competitive advantage is eroded depends on the stability of market demand, and the ease of replicability (expanding intemally) and imitatability (replication by competitors). If correct, the framework suggests that private wealth creation in regimes of rapid technological change depends in large measure on honing intemal technological, organizational, and managerial processes inside the firm. In short, identifying new opportunities and organizing effectively and efficiently to embrace them are generally more fundamental to private wealth creation than is strategizing, if by strategizing one means engaging in business conduct that keeps competitors off balance, raises rival's costs, and excludes new entrants. © 1997 by John Wiley & Sons, Ltd.
Article
Complex organizations exhibit surprising, nonlinear behavior. Although organization scientists have studied complex organizations for many years, a developing set of conceptual and computational tools makes possible new approaches to modeling nonlinear interactions within and between organizations. Complex adaptive system models represent a genuinely new way of simplifying the complex. They are characterized by four key elements: agents with schemata, self-organizing networks sustained by importing energy, coevolution to the edge of chaos, and system evolution based on recombination. New types of models that incorporate these elements will push organization science forward by merging empirical observation with computational agent-based simulation. Applying complex adaptive systems models to strategic management leads to an emphasis on building systems that can rapidly evolve effective adaptive solutions. Strategic direction of complex organizations consists of establishing and modifying environments within which effective, improvised, self-organized solutions can evolve. Managers influence strategic behavior by altering the fitness landscape for local agents and reconfiguring the organizational architecture within which agents adapt.
Article
Major innovation (MI), composed of both radical and really new innovation, is an important mechanism for enabling the growth and renewal of an enterprise. Yet it is poorly managed in most established firms, and success stories are rare. This conceptual article draws on systems theory, recent advances in dynamic capabilities theory, and the management of innovation literature to offer a framework for building an MI dynamic capability. The framework is composed of seven elements that together form a management system rather than a process-based approach to nurturing radical innovation. These system elements are (1) an identifiable organization structure; (2) interface mechanisms with the mainstream organization, some of which are tightly coupled and others of which are loose; (3) exploratory processes; (4) requisite skills and talent development, given that entrepreneurial talent is not present in most organizations; (5) governance and decision-making mechanisms at the project, MI portfolio, and MI system levels; (6) appropriate performance metrics; and (7) an appropriate culture and leadership context. It is argued that dynamic capabilities for phenomena as complex as MI must be considered in a systems fashion rather than as operating routines and repeatable processes as the literature currently suggests. A set of propositions is offered regarding how each element should play out in this parallel management system. Finally, each element's role in the major innovation system is justified in terms of four criteria required by systems theory: (1) The system is identifiable, and its elements are interdependent; (2) the effect of the whole is greater than the sum of the parts; (3) homeostasis is achieved through interaction and networking with the larger organization; and (4) there is a clear purpose in the larger system in which the MI management system is embedded. Examples are given to demonstrate these criteria. Systems theory offers a new way of thinking about dynamic capability development and management.
Article
Management systems are part of virtually every organization. However, so far no systematic effort has been made to distinguish different stages in the adaptive process of management systems according to sophistication criteria. By building on existing theories in the areas of systems control, cybernetics, and general systems theory, this paper develops and presents a taxonomy of management systems. It is shown that flowing-equilibrium (F-E) management systems can explain systems behavior that cannot be explained by management theory based on cybernetics or double-loop learning. Copyright © 2002 John Wiley & Sons, Ltd.
Article
The curriculum at many business schools is in a period of ferment as overhauls are contemplated for a variety of reasons. One of the most compelling needs is for integration across disciplines. The Dynamic Capabilities Framework, one of the dominant paradigms in management studies, can serve this unifying function by providing guidance for integrating the curriculum across disciplines and between theory and practice. Implementation along the lines proposed will give students more of what they want and improve the contribution of business schools to the conception and pursuit of managerial goals.
Article
This paper draws on the social and behavioral sciences in an endeavor to specify the nature and microfoundations of the capabilities necessary to sustain superior enterprise performance in an open economy with rapid innovation and globally dispersed sources of invention, innovation, and manufacturing capability. Dynamic capabilities enable business enterprises to create, deploy, and protect the intangible assets that support superior long- run business performance. The microfoundations of dynamic capabilities—the distinct skills, processes, procedures, organizational structures, decision rules, and disciplines—which undergird enterprise-level sensing, seizing, and reconfiguring capacities are difficult to develop and deploy. Enterprises with strong dynamic capabilities are intensely entrepreneurial. They not only adapt to business ecosystems, but also shape them through innovation and through collaboration with other enterprises, entities, and institutions. The framework advanced can help scholars understand the foundations of long-run enterprise success while helping managers delineate relevant strategic considerations and the priorities they must adopt to enhance enterprise performance and escape the zero profit tendency associated with operating in markets open to global competition. Copyright © 2007 John Wiley & Sons, Ltd.
Article
The paper explores the usefulness of analysing firms from the resource side rather than from the product side. In analogy to entry barriers and growth-share matrices, the concepts of resource position barrier and resource-product matrices are suggested. These tools are then used to highlight the new strategic options which naturally emerge from the resource perspective.
Article
Corporate effects in variance decomposition capture heterogeneity of business performance derived from factors internal to firms at the corporate level. Most estimates of corporate effects do not include effects associated with fluctuations in returns over time, except insofar as the fluctuations affect the average corporate return for the time period in question. Exclusion of the time-varying dimension of the corporate effect makes it difficult to fully understand the effect of corporate strategy and the actions of corporate managers, particularly in response to a changing environment. The evidence in this article shows that within a single industry, where managers face the same external environment, time-varying corporate effects associated with corporate level managerial decisions are statistically significant. We introduce the concept of dynamic managerial capabilities to underpin the finding of heterogeneity in managerial decisions and firm performance in the face of changing external conditions. Copyright © 2003 John Wiley & Sons, Ltd.
Article
The article reflects on the diffusion of the ‘resource-based view of the firm’ into academic and practitioner thought. The contributions of many people are noted. In closing, I offer some speculations about the future use of these ideas.
Article
In recent years increasing need has been felt for a body of systematic theoretical constructs which will discuss the general relationships of the empirical world. This is the quest of General Systems Theory. It does not seek, of course, to establish a single, self-contained "general theory of practically everything" which will replace all the special theories of particular disciplines. Such a theory would be almost without content, for we always pay for generality by sacrificing content, and all we can say about practically everything is almost nothing. Somewhere however between the specific that has no meaning and the general that has no content there must be, for each purpose and at each level of abstraction, an optimum degree of generality. It is the contention of the General Systems Theorists that this optimum degree of generality in theory is not always reached by the particular sciences.
Article
This paper suggests that an induction of change program leads to atemporary impairment of organizational performance. A System Dynamics Modelportrays the process of planned organizational change. A set of keyvariables that facilitate or impede change is identified, quantified, andintegrated into the model. Three data sets, reproduced by simulation,demonstrate that the model is internally consistent and empiricallyadequate. The paper discusses theoretical and practical implications of theinitial dip phenomenon in processes of planned change.
Article
This article has presented a general approach for thinking about organizational functioning and a process for using a model to analyze organizational problems. This particular model is only one way of thinking about organizations; its clearly not the only model, nor can we claim it's definitively the best model. It is one tool, however, that may be useful for structuring the complexity of organizational life and helping managers create, maintain, and develop effective organizations.
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This paper attempts to explain why innovating firms often fail to obtain significant economic returns from an innovation, while customers, imitators and other industry participants benefit Business strategy — particularly as it relates to the firm's decision to integrate and collaborate — is shown to be an important factor. The paper demonstrates that when imitation is easy, markets don't work well, and the profits from innovation may accrue to the owners of certain complementary assets, rather than to the developers of the intellectual property. This speaks to the need, in certain cases, for the innovating firm to establish a prior position in these complementary assets. The paper also indicates that innovators with new products and processes which provide value to consumers may sometimes be so ill positioned in the market that they necessarily will fail. The analysis provides a theoretical foundation for the proposition that manufacturing often matters, particularly to innovating nations. Innovating firms without the requisite manufacturing and related capacities may die, even though they are the best at innovation. Implications for trade policy and domestic economic policy are examined.
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