1. Dynamic Capabilities and Strategic Management
3/12/17
Dynamic Capabilities and Strategic Management
Teece, Pisano, Shuen (1997)
Anand RV
9/28/2017

2. What this paper is about?
3/12/17
What this paper is about?
Addressing a fundamental question in strategic management
Achieving and sustaining competitive advantage
Integrating multiple frameworks
Industrial organization and RBV ⍧(organizational economics)
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3. Industrial organization approach
3/12/17
Industrial organization approach
Competitive forces approach-Porter (1980)
The objective is to minimize largely external forces
Strategic conflict approach-
The objective is to manipulate or cooperate with competitors
Game theoretic approaches
Co-opetition
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4. RBV Resources/capabilities/endowments lead to firm heterogeneity
Such resources are sticky
Business development is complex
Some assets are not tradeable
Purchase does not guarantee effective usage
Focus on exploitation
This focus strengthens the case for developing new capabilities
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5. Dynamic capabilities Dynamic Capabilities
“The term 'dynamic' refers to the capacity to renew competences so as to achieve congruence with the changing business environment; certain innovative responses are required when time-to-market and timing are critical, the rate of technological change is rapid, and the nature of future competition and markets difficult to determine”
Capabilities
“capabilities' emphasizes the key role of strategic management in appropriately adapting, integrating, and reconfiguring internal and external organizational skills, resources, and functional competences to match the requirements of a changing environment”
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6. Key Terms Factors of production Resources
Organizational routines/competences
Core competences
Products
Dynamic capabilities
We define dynamic capabilities as the firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments
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7. Dynamic capabilities, TCE and PRT
Dynamic capabilities necessitates the question of where such resources can be created
Can they be purchased from the market?
Then by default such resources are homogenous
Dynamic capabilities are heterogeneous
The cost of renewal and adaptation is a major concern thus TCE and PRT are also key considerations
Thus the firm becomes the default mode for developing dynamic capabilities
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8. Understanding dynamic capabilities
PPP framework
Processes
Routines & practices
Positions
Current resources
Paths
Strategic alternatives available to the firm
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9. Processes & Positions
The firm's processes and positions collectively encompass its competences and capabilities
Processes are required for
Coordination, learning and reconfiguration
Positions encompass
Technological, financial, reputational, structural, institutional and market assets
Boundaries
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10. Paths
History matters
Governance inseparability?
Path dependencies are amplified when increasing returns of adoption exist
Technological opportunities
Paradoxical relationship between technological uncertainty and path dependencies?
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11. Replicability and imitability
Processes that advance dynamic capabilities are central to replication
In turn they support
Expansion
Learning
Imitation
Replication by others
Inversely related to tacit knowledge
IP rights make imitation more difficult
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13. Discussion questions
How do dynamic capabilities influence corporate governance? Do more effective processes and positions envelop board inefficiencies?
What are some of the measures of dynamic capabilities?
Are dynamic capabilities a reflective or a formative measure?
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