1. Knowledge in the MNC
Dynamic Capabilities

2. ․Eisenhardt & Martin(2000)
Resource Based View
Dynamic Capabilities & market environment
The Role of Managers
Dynamic Capabilities in Innovation
․Eisenhardt & Martin(2000)
․ Augier & Teece(2009)

3. Eisenhardt & Martin (2000) Dynamic Capabilities: What are they?
Resource Based View: View that firm's resources are the source of its competitive advantage. Dynamic capabilities: Set of specific and identifiable strategic and organizational processes. (eg. Strategic decision making and alliancing) Thesis of the article: RBV misidentifies locus of competitive advantage in dynamic markets, overemphasizes the strategic logic of leverage, and reaches a boundary condition in high velocity markets.

4. Context - Resource Based View
Dimensions
Industry Structure View
Resource-Based View
Relational View
Unit of Analysis
Industry
Firm
Pair or Network of Firms
Source of Competitive Advantage
Rel. Bargaining Power
Barriers to entry
Resources:
Physical, Human, Techn., Financial, Intangible
Relation-Specific Investments
Interfirm Knowledge sharing routines
Managerial Application
Market Research
Strategy formulation
Identifying vital resources
Improving processes
Collaboration Strategies

5. Key Considerations - Resource Based View
Definition of RBV:
View that firm's resources, are the source of its competitive advantage.
Especially when → rare, inimitable and non-substitutable(VRIN attributes)
Key Considerations:
Heterogenous – Firm resources differ from each other
(case: Apple vs. Samsung. Same external conditions)
Immobile – Companies cannot replicate rival's resources and use same strategies (at least in short-term)

6. Critisism - Resource Based View
RBV breaks down in High Velocity Markets:
Duration of competitive advantage unpredictable
Time is essential aspect of strategy
Dynamics capabilities are unstable processes that are challenging to sustain.
VRIN dynamic capabilities not source of long term competitive advantage, because best practices exist
RBV Thinking overemphasizes the strategic logic of leverage
→ In reality competitive advantage is often short term

7. Dynamic Capabilities vs RBV
The firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments (Teece et al, 1997)
The main difference between the resource-based view of the firm and dynamic capabilities is the fact that the latter focuses more on the issue of competitive survival rather than achievement of sustainable competitive advantage.
This focus appears to be closer to contemporary business realities, the latter being more "high-velocity" than the case in previous decades

8. Conceptions of dynamic capabilities
Traditional Views
Reconceptualization
Definition: Routines
Specific organizational and strategic processes
Heterogeneity: Firm specific
Commonalities
Pattern: Detailed
Depending on market dynamism
Outcome: Predictable
Unpredictable
Competitive Advantage: sustanained competitive advantages from VRIN DCs
Competitive advantage from rare,
substitutable DCs
Evolution: Unique path
Unique path shaped by learning

9. Dynamic Capabilities and Market dynamism
Moderately dynamic markets
High velocity markets
Def: Stable stucture
Ambiguos structure
Pattern: Detailed, analytic,
rely extensively on existing knowledge
Simple, experimental, rely on
newly created knowledge
Execution: Linear
Interative
Outcomes: Predictable
Unpredictable

10. Two key questions for manager
1. How can senior managers of successful companies change their existing mental models to adapt to radical discontinuous change?
2. Ultimately, how can companies maintain capability standards and hence ensure competitive survival?

11. Three dynamic capabilities
Learn
Intergrate
Combine
Transform
Organizations and their employees need the capability to learn quickly and to build strategic assets.
New strategic assets such as capability, technology and customer feedback have to be integrated within the company.
Existing strategic assets have to be transformed or reconfigured.

12. Requires a different breed of manager……
The Role of Managers
In today’s economy ,
Requires a different breed of manager……

13. Transform & Reconfigure
A manager must lead,
Dynamic Capabilities
Sense & Seize
opportunities
Transform & Reconfigure
opportunities
Entrepreneurial
management
Learning
Decision making

14. David Teece: Actually, they don't.
Do managers really understand their organization capabilities ?
David Teece: Actually, they don't.

15. Dynamic capabilities take a very long time to acquire.
But once a company has those capabilities,
they hold up for a very long time and are extremely difficult to replicate.

16. Apple Inc. - Steve Jobs

17. Apple Inc. - Steve Jobs

18. The dynamic Activities that David Teece learned from Apple

19. Steve Jobs: “ The system is that there is no system. ”
That doesn’t mean we don’t have process. Apple is a disciplined company, and we have great processes. But that's not what it's about... Innovation comes from meeting people in the hallways or calling each other at 10:30 at night with a new idea... It comes from saying no to 1,000 things, to make sure we don't get on the wrong track.
[BusinessWeek, Oct. 12, 2004]

20. Organizational Capabilities
Expertise of organization
Resources into offerings
Dynamic Capabilities
Going beyond routines
”Best practices”
What they do well
Associated with change
Processes key part of organizational excellence

21. Dynamic Capabilities in Innovation
Dynamic capabilities are well suited for unstable situations
Innovation often means change and uncertainty
Dynamic capabilities works with:
Situation-specific knowledge
Ad-hoc problem solving
Iterative adaptation to unforeseen outcomes
Dynamic capabilities go
hand-in hand with innovation

22. Adapted from Lee and Kelley 2008
Entrepren-eurial Resource Deployment
Relational Support
Decision Support
Skills, tacit knowledge held by individuals
Promoting understanding and trust
Advice and perspective
Adapted from Lee and Kelley 2008

23. Managerial suggestions for innovation project leaders
Entrepreneurial skills and motivation
Accompanying experience and knowledge
Relational support role
Communication and commitment
Decision support role
Guidance-oriented instead of monitoring and control

24. Case: Aalto University layoffs
Aalto University’s statutory negotiations have ended
Negotiations concerned all personnel excluding professors
Savings due to cuts in public funding of universities ( € 66 million)
Resulting in personnel reductions of about 190 people
Discuss with your neighbors:
Based on RBV and dynamic capabilities approach, how could Aalto manage this changing situation while pursuing their goal of being a Top University?