Deliberate Learning and the Evolution of Dynamic Capabilities
TL;DR: The argument is made that dynamic capabilities are shaped by the coevolution of these learning mechanisms, and 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.
Abstract: 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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TL;DR: In this paper, 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, and whether higher-order capabilities are created or not depends on the costs and benefits of the investments relative to ad hoc problem solving.
Abstract: 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.
4,393 citations
Cites background from "Deliberate Learning and the Evoluti..."
...Deliberate investments in organizational learning may, for example, facilitate the creation and modification of dynamic capabilities for the management of acquisitions or alliances (Zollo and Winter, 2002)....
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TL;DR: The capability lifecycle provides a structure for a more comprehensive approach to dynamic resource-based theory and incorporates the founding, development, and maturity of capabilities in a manner that helps to explain the sources of heterogeneity in organizational capabilities.
Abstract: This article introduces the concept of the capability lifecycle (CLC), which articulates general patterns and paths in the evolution of organizational capabilities over time. The capability lifecycle provides a structure for a more comprehensive approach to dynamic resource-based theory. The analysis incorporates the founding, development, and maturity of capabilities in a manner that helps to explain the sources of heterogeneity in organizational capabilities. In addition, the analysis includes the "branching" of an original capability into several possible altered forms.
3,348 citations
TL;DR: The capability lifecycle (CLC) as mentioned in this paper provides a structure for a more comprehensive approach to dynamic resource-based theory, incorporating the founding, development, and maturity of capabilities in a manner that helps to explain the sources of heterogeneity in organizational capabilities.
Abstract: This article introduces the concept of the capability lifecycle (CLC), which articulates general patterns and paths in the evolution of organizational capabilities over time. The capability lifecycle provides a structure for a more comprehensive approach to dynamic resource-based theory. The analysis incorporates the founding, development, and maturity of capabilities in a manner that helps to explain the sources of heterogeneity in organizational capabilities. In addition, the analysis includes the ‘branching’ of an original capability into several possible altered forms. Copyright © 2003 John Wiley & Sons, Ltd.
2,902 citations
Book•
07 Jul 1998
TL;DR: In this paper, the authors present a framework for analyzing strategies in the context of a large-scale industrial setting, based on the concepts of value maximization and profit maximization.
Abstract: Preface. PART I INTRODUCTION. 1 The Concept of Strategy. Introduction and Objectives. The Role of Strategy in Success. The Basic Framework for Strategy Analysis. A Brief History of Business Strategy. Strategic Management Today. The Role of Analysis in Strategy Formulation. Summary. Self-Study Questions. Notes. PART II THE TOOLS OF STRATEGY ANALYSIS. 2 Goals, Values and Performance. Introduction and Objectives. Strategy as a Quest for Value. Strategy and Real Options. Putting Performance Analysis into Practice. Beyond Profit: Values and Social Responsibility. Summary. Self-Study Questions. Notes. 3 Industry Analysis: The Fundamentals. Introduction and Objectives. From Environmental Analysis to Industry Analysis. The Determinants of Industry Profit: Demand and Competition. Analyzing Industry Attractiveness. Applying Industry Analysis. Defining Industries: Where to Draw the Boundaries. From Industry Attractiveness to Competitive Advantage: Identifying Key Success Factors. Summary. Self-Study Questions. Notes. 4 Further Topics in Industry and Competitive Analysis. Introduction and Objectives. Extending the Five Forces Framework. The Contribution of Game Theory. Competitor Analysis. Segmentation Analysis. Strategic Groups. Summary. Self-Study Questions. Notes. 5 Analyzing Resources and Capabilities. Introduction and Objectives. The Role of Resources and Capabilities in Strategy Formulation. The Resources of the Firm. Organizational Capabilities. Appraising Resources and Capabilities. Putting Resource and Capability Analysis to Work: A Practical Guide. Summary. Self-Study Questions. Notes. 6 Developing Resources and Capabilities. Introduction and Objectives. Developing Resources. The Challenge of Capability Development. Approaches to Capability Development. Knowledge Management and the Knowledge-based View. Designing Knowledge Management Systems. Summary. Self-Study Questions. Notes. 7 Organization Structure and Management Systems: The Fundamentals of Strategy Implementation. Introduction and Objectives. The Evolution of the Corporation. The Organizational Problem: Reconciling Specialization with Coordination and Cooperation. Hierarchy in Organizational Design. Applying the Principles of Organizational Design. Organizing on the Basis of Coordination Intensity. Alternative Structural Forms. Management Systems for Coordination and Control. Summary. Self-Study Questions. Notes. PART III THE ANALYSIS OF COMPETITIVE ADVANTAGE. 8 The Nature and Sources of Competitive Advantage. Introduction and Objectives. The Emergence of Competitive Advantage. Sustaining Competitive Advantage. Competitive Advantage in Different Market Settings. Types of Competitive Advantage: Cost and Differentiation. Summary. Self-Study Questions. Notes. 9 Cost Advantage. Introduction and Objectives. Strategy and Cost Advantage. The Sources of Cost Advantage. Using the Value Chain to Analyze Costs. Summary. Self-Study Questions. Notes. 10 Differentiation Advantage. Introduction and Objectives. The Nature of Differentiation and Differentiation Advantage. Analyzing Differentiation: The Demand Side. Analyzing Differentiation: The Supply Side. Bringing It All Together: The Value Chain in Differentiation Analysis. Summary. Self-Study Questions. Notes. PART IV BUSINESS STRATEGIES IN DIFFERENT INDUSTRY CONTEXTS. 11 Industry Evolution and Strategic Change. Introduction and Objectives. The Industry Life Cycle. Structure, Competition and Success Factors over the Life Cycle. Organizational Adaptation and Change. Summary. Self-Study Questions. Notes. 12 Technology-based Industries and the Management of Innovation. Introduction and Objectives. Competitive Advantage in Technology-intensive Industries. Strategies to Exploit Innovation: How and When to Enter. Competing for Standards. Implementing Technology Strategies: Creating the Conditions for Innovation. Summary. Self-Study Questions. Notes. 13 Competitive Advantage in Mature Industries. Introduction and Objectives. Competitive Advantage in Mature Industries. Strategy Implementation in Mature Industries: Structure, Systems and Style. Strategies for Declining Industries. Summary. Self-Study Questions. Notes. PART V CORPORATE STRATEGY. 14 Vertical Integration and the Scope of the Firm. Introduction and Objectives. Transaction Costs and the Scope of the Firm. The Costs and Benefits of Vertical Integration. Designing Vertical Relationships. Summary. Self-Study Questions. Notes. 15 Global Strategies and the Multinational Corporation. Introduction and Objectives. Implications of International Competition for Industry Analysis. Analyzing Competitive Advantage in an International Context. Applying the Framework: International Location of Production. Applying the Framework: Foreign Entry Strategies. Multinational Strategies: Global Integration versus National Differentiation. Strategy and Organization within the Multinational Corporation. Summary. Self-Study Questions. Notes. 16 Diversification Strategy. Introduction and Objectives. Trends in Diversification over Time. Motives for Diversification. Competitive Advantage from Diversification. Diversification and Performance. Summary. Self-Study Questions. Appendix: Does Diversification Confer Market Power? Notes. 17 Implementing Corporate Strategy: Management of the Multibusiness Firm. Introduction and Objectives. Governance and the Structure of the Multibusiness Corporation. The Role of Corporate Management. Managing the Corporate Portfolio. Managing Individual Businesses. Managing Linkages between Businesses. Managing Change in the Multibusiness Corporation. External Strategy: Mergers and Acquisitions. Summary. Self-Study Questions. Notes. 18 Current Trends in Strategic Management. Introduction. The New External Environment of Business. Managing in an Economic Crisis. New Directions in Strategic Thinking. Redesigning the Organization. New Modes of Leadership. Summary. Notes. Index.
2,618 citations
TL;DR: In this paper, a definition of dynamic capabilities, separating them from substantive capabilities as well as from their antecedents and consequences, is proposed, and a set of propositions that outline how substantive capabilities and dynamic capabilities are related to one another, how this relationship is moderated by organizational knowledge and skills, and how organizational age affects the speed of utilization of dynamic capability and the learning mode used in organizational change.
Abstract: The emergent literature on dynamic capabilities and their role in value creation is riddled with inconsistencies, overlapping definitions, and outright contradictions. Yet, the theoretical and practical importance of developing and applying dynamic capabilities to sustain a firm's competitive advantage in complex and volatile external environments has catapulted this issue to the forefront of the research agendas of many scholars. In this paper, we offer a definition of dynamic capabilities, separating them from substantive capabilities as well as from their antecedents and consequences. We also present a set of propositions that outline (1) how substantive capabilities and dynamic capabilities are related to one another, (2) how this relationship is moderated by organizational knowledge and skills, (3) how organizational age affects the speed of utilization of dynamic capabilities and the learning mode used in organizational change, and (4) how organizational knowledge and market dynamism affect the likely value of dynamic capabilities. Our discussion and model help to delineate key differences in the dynamic capabilities that new ventures and established companies have, revealing a key source of strategic heterogeneity between these firms.
2,546 citations
References
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TL;DR: In this paper, the authors argue that the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends is critical to its innovative capabilities.
Abstract: In this paper, we argue that the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends is critical to its innovative capabilities. We label this capability a firm's absorptive capacity and suggest that it is largely a function of the firm's level of prior related knowledge. The discussion focuses first on the cognitive basis for an individual's absorptive capacity including, in particular, prior related knowledge and diversity of background. We then characterize the factors that influence absorptive capacity at the organizational level, how an organization's absorptive capacity differs from that of its individual members, and the role of diversity of expertise within an organization. We argue that the development of absorptive capacity, and, in turn, innovative performance are history- or path-dependent and argue how lack of investment in an area of expertise early on may foreclose the future development of a technical capability in that area. We formulate a model of firm investment in research and development (R&D), in which R&D contributes to a firm's absorptive capacity, and test predictions relating a firm's investment in R&D to the knowledge underlying technical change within an industry. Discussion focuses on the implications of absorptive capacity for the analysis of other related innovative activities, including basic research, the adoption and diffusion of innovations, and decisions to participate in cooperative R&D ventures. **
31,623 citations
"Deliberate Learning and the Evoluti..." refers background in this paper
...…(1957) “distinctive competence”, to the more recent and refined notions of organizational routines (Nelson and Winter, 1982), absorptive capacity (Cohen and Levinthal, 1990), architectural knowledge (Henderson and Clark, 1990), combinative capabilities (Kogut and Zander, 1992) and, finally,…...
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TL;DR: The dynamic capabilities framework as mentioned in this paper analyzes the sources and methods of wealth creation and capture by private enterprise firms operating in environments of rapid technological change, and suggests that private wealth creation in regimes of rapid technology change depends in large measure on honing intemal technological, organizational, and managerial processes inside the firm.
Abstract: 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.
27,902 citations
"Deliberate Learning and the Evoluti..." refers background in this paper
...From pioneering efforts such as Selznick' s (1957) "distinctive competence," to the more recent and refined notions of organizational routines (Nelson and Winter 1982), absorptive capacity (Cohen and Levinthal 1990), architectural knowledge (Henderson and Clark 1990), combinative capabilities (Kogut and Zander 1992) and, finally, dynamic capabilities (Teece et al. 1997), there are decades of investment in sorting out the traits and the boundaries of the phenomena....
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Posted Content•
TL;DR: In this paper, the authors developed an evolutionary theory of the capabilities and behavior of business firms operating in a market environment, including both general discussion and the manipulation of specific simulation models consistent with that theory.
Abstract: This study develops an evolutionary theory of the capabilities and behavior of business firms operating in a market environment. It includes both general discussion and the manipulation of specific simulation models consistent with that theory. The analysis outlines the differences between an evolutionary theory of organizational and industrial change and a neoclassical microeconomic theory. The antecedents to the former are studies by economists like Schumpeter (1934) and Alchian (1950). It is contrasted with the orthodox theory in the following aspects: while the evolutionary theory views firms as motivated by profit, their actions are not assumed to be profit maximizing, as in orthodox theory; the evolutionary theory stresses the tendency of most profitable firms to drive other firms out of business, but, in contrast to orthodox theory, does not concentrate on the state of industry equilibrium; and evolutionary theory is related to behavioral theory: it views firms, at any given time, as having certain capabilities and decision rules, as well as engaging in various ‘search' operations, which determines their behavior; while orthodox theory views firm behavior as relying on the use of the usual calculus maximization techniques. The theory is then made operational by the use of simulation methods. These models use Markov processes and analyze selection equilibrium, responses to changing factor prices, economic growth with endogenous technical change, Schumpeterian competition, and Schumpeterian tradeoff between static Pareto-efficiency and innovation. The study's discussion of search behavior complicates the evolutionary theory. With search, the decision making process in a firm relies as much on past experience as on innovative alternatives to past behavior. This view combines Darwinian and Lamarkian views on evolution; firms are seen as both passive with regard to their environment, and actively seeking alternatives that affect their environment. The simulation techniques used to model Schumpeterian competition reveal that there are usually winners and losers in industries, and that the high productivity and profitability of winners confer advantages that make further success more likely, while decline breeds further decline. This process creates a tendency for concentration to develop even in an industry initially composed of many equal-sized firms. However, the experiments conducted reveal that the growth of concentration is not inevitable; for example, it tends to be smaller when firms focus their searches on imitating rather than innovating. At the same time, industries with rapid technological change tend to grow more concentrated than those with slower progress. The abstract model of Schumpeterian competition presented in the study also allows to see more clearly the public policy issues concerning the relationship between technical progress and market structure. The analysis addresses the pervasive question of whether industry concentration, with its associated monopoly profits and reduced social welfare, is a necessary cost if societies are to obtain the benefits of technological innovation. (AT)
22,566 citations
TL;DR: In this paper, the authors explore the usefulness of analyzing 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.
Abstract: Summary 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.
18,677 citations
TL;DR: In this paper, the authors propose a paradigm for managing the dynamic aspects of organizational knowledge creating processes, arguing that organizational knowledge is created through a continuous dialogue between tacit and explicit knowledge.
Abstract: This paper proposes a paradigm for managing the dynamic aspects of organizational knowledge creating processes. Its central theme is that organizational knowledge is created through a continuous dialogue between tacit and explicit knowledge. The nature of this dialogue is examined and four patterns of interaction involving tacit and explicit knowledge are identified. It is argued that while new knowledge is developed by individuals, organizations play a critical role in articulating and amplifying that knowledge. A theoretical framework is developed which provides an analytical perspective on the constituent dimensions of knowledge creation. This framework is then applied in two operational models for facilitating the dynamic creation of appropriate organizational knowledge.
17,196 citations
"Deliberate Learning and the Evoluti..." refers background in this paper
...These sets of ideas, initially in embryonic and partly tacit form, are then subject to internal selection pressures aimed at the evaluation of their potential for enhancing the effectiveness of existing routines or the opportunity to form new ones (Nonaka, 1994)....
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...The literature has emphasized that codification facilitates the diffusion of existing knowledge (Winter, 1987; Zander and Kogut, 1992; Nonaka, 1994), as well as the coordination and implementation of complex activities....
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...The changing nature of knowledge throughout the evolutionary cycle is an issue of primary concern to us as well as several other scholars (Nonaka, 1994; Nonaka and Takeuchi, 1995)....
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