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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Dynamic capabilities, what are they?

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.

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Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance

Co-Planar Stereotaxic Atlas of the Human Brain—3-Dimensional Proportional System: An Approach to Cerebral Imaging, J. Talairach, P. Tournoux. Georg Thieme Verlag, New York (1988), 122 pp., 130 figs. DM 268

Defining ordinary or ‘zero-level’ capabilities as those that permit a firm to ‘make a living’ in the short term, one can define dynamic capabilities as those that operate to extend, modify or create ordinary capabilities. Logically, one can then proceed to elaborate a hierarchy of higher-order capabilities. However, it is argued here that the strategic substance of capabilities involves patterning of activity, and that costly investments are typically required to create and sustain such patterning—for example, in product development. Firms can accomplish change without reliance on dynamic capability, by means here termed ‘ad hoc problem solving.’ Whether higher-order capabilities are created or not depends on the costs and benefits of the investments relative to ad hoc problem solving, and so does the ‘level of the game’ at which strategic competition effectively occurs. Copyright © 2003 John Wiley & Sons, Ltd.

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Understanding dynamic capabilities

Emotion and Adaptation

This paper investigates the mechanisms through which organizations develop dynamic capabilities, defined as routinized activities directed to the development and adaptation of operating routines. It addresses the role of (1) experience accumulation, (2) knowledge articulation, and (3) knowledge codifi- cation processes in the evolution of dynamic, as well as operational, routines. The argument is made that dynamic capabilities are shaped by the coevolution of these learning mechanisms. At any point in time, firms adopt a mix of learning behaviors constituted by a semiautomatic accumulation of experience and by deliberate investments in knowledge articulation and codification activities. The relative effectiveness of these capability-building mechanisms is analyzed here as contingent upon selected features of the task to be learned, such as its frequency, homogeneity, and degree of causal ambiguity. Testable hypotheses about these effects are derived. Somewhat counterintuitive implications of the analysis include the relatively superior effectiveness of highly deliberate learning processes such as knowledge codification at lower levels of frequency and homogeneity of the organizational task, in contrast with common managerial practice.

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Deliberate Learning and the Evolution of Dynamic Capabilities

This paper applies evolutionary economics reasoning to the strategic alliance context and examines whether and how routinization processes at the partnering-firm level influence the performance of the cooperative agreement. In doing so, it introduces the concept of interorganizational routines, defined as stable patterns of interaction among two firms developed and refined in the course of repeated collaborations, and suggests that partner-specific, technology-specific, and general experience accumulation at the partnering-firm level influence the extent to which alliances result in knowledge accumulation, create new growth opportunities, and enable partnering firms to achieve their strategic objectives. We also consider how governance design choices at the transaction level shape the effectiveness of interorganizational routizination processes. Based on a sample of 145 biotechnology alliances, we find that only partner-specific experience has a positive impact on alliance performance, and that this effect is stronger in the absence of equity-based governance mechanisms. We interpret these results to support the role of interfirm coordination and cooperation routines in enhancing the effectiveness of collaborative agreements.

Interorganizational Routines and Performance in Strategic Alliances

This paper introduces a knowledge-based view of corporate acquisitions and tests the post-acquisition consequences on performance of integration decisions and capability-building mechanisms. In our model, the acquiring firm decides both how much to integrate the acquired firm and the extent to which it replaces this firm's top management team. It can also learn to manage the post-acquisition integration process by tacitly accumulating acquisition experience and explicitly codifying it in manuals, systems, and other acquisition-specific tools. Using a sample of 228 acquisitions in the U.S. banking industry, we find that knowledge codification strongly and positively influences acquisition performance, while experience accumulation does not. Furthermore, increasing levels of post-acquisition integration strengthen the positive effect of codification. Finally, the level of integration between the two merged firms significantly enhances performance, while replacing top managers in the acquired firm negatively impacts performance, all else being equal. Implications are drawn for both organizational learning theory and a knowledge-based approach to corporate strategy research. Copyright © 2004 John Wiley & Sons, Ltd.

Deliberate learning in corporate acquisitions: post‐acquisition strategies and integration capability in U.S. bank mergers

The management of technology acquisitions - acquisitions of small technology based firms by large established firms - poses a dilemma in terms of how to organize for innovation. Acquirers must integrate acquired firms in order to exploit their capabilities and technologies in a coordinated manner; at the same time, they must preserve organizational autonomy for acquired firms in order to avoid disrupting their capacity for continued exploration. In this study, we suggest that the coordination-autonomy dilemma can be better managed by recognizing that the effect of a structural form on innovation outcomes is contingent on the stage of development of the innovation trajectory of the acquired firm. Specifically, we show that structural integration lowers the hazard of new product introductions for acquired firms that have not launched any products prior to acquisition and for all acquired firms in the immediate aftermath of the acquisition, but these adverse effects disappear as the innovation trajectory evolves beyond these stages. We discuss implications for our understanding of post merger integration, and the organizational challenges of balancing exploration and exploitation in high velocity environments.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID740464_code370849.pdf?abstractid=740464

Organizing for Innovation: Managing the Coordination-Autonomy Dilemma in Technology Acquisitions

This paper investigates the occurrence and determinants of post-formation governance changes in strategic alliances, including alterations in alliances' contracts, boards or oversight committees, and monitoring mechanisms. We examine alliances in the biotechnology industry and find that firms' unique alliance experience trajectories affect the likelihood of such ex post adjustments in these partnerships. Transactional features such as the alliance's scope, its division of labor, and the relevance of the collaboration to the parent firm also bear upon alliances' dynamics. We discuss the implications of these findings and how they complement prior research focusing on alliance design or termination at opposite ends of the alliance life cycle. Copyright © 2002 John Wiley & Sons, Ltd.

Maurizio Zollo

Papers

Deliberate Learning and the Evolution of Dynamic Capabilities

Interorganizational Routines and Performance in Strategic Alliances

Deliberate learning in corporate acquisitions: post‐acquisition strategies and integration capability in U.S. bank mergers

Organizing for Innovation: Managing the Coordination-Autonomy Dilemma in Technology Acquisitions

Post-formation dynamics in strategic alliances