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It discusses about various models of strategy and related critiques
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Dynamic Capabilities and Strategic Management
(Strategic Management Journal, 18, 7, 509-534)
Presented By:
Syed Shahid HussainMaham ShahidRehman Asif
Authors of the Article
David J. Teece AMY SHUENGary Pisano
I N T R O D U C T I O N
Models of Strategy
1. Emphasizing the exploitation of market power(competitive forces & strategic conflict)
2. Emphasizing efficiency(resource-based perspective & dynamic capabilities approach)
TOWARD A DYNAMIC CAPABILITIES FRAMEWORK- Markets and strategic capabilities- Processes, positions, and paths- Replicability and imitatability of organizational processes and positions
CRITIQUES
INTRODUCTION Introduction of existing three paradigms
- Competitive forces (Industry-Specific)- Strategic conflict (Game theory based on managerial
ability)- Resource-based (Firm-Specific)
Emerging new paradigm – ‘dynamic capabilities’- Processes, positions, and paths- Replicability and imitatability of organisational
processes and positions
I N T R O D U C T I O N…
Paradigms of Strategy: Salient Characteristics
AssumptionFirms can achieve and sustain competitive advantage by developing the dynamic capabilities approach to address rapidly changing environments.
PurposeTo provide a coherent framework which can both integrate existing conceptual and empirical knowledge and facilitate prescription.
- Definition• The term dynamic refers to the capacity to
renew competences so as to achieve congruencewith the changing business environment.
• The term capabilities emphasizes the key role ofstrategic management in appropriately adapting,integrating, and reconfiguring internal andexternal organizational skills, resources andfunctional competencies to match therequirements of a changing environment.
- Definition
• The term dynamic capabilities refers to thefirm’s ability to integrate, build, and reconfigureinternal and external competences to addressrapidly changing environment.
• It reflect an organization’s ability to achieve newand innovative forms of competitive advantagegiven path dependencies and market positions.
processespositions
paths
Transferring orredeployingcompetences fromone concreteeconomic settingto another
replication
imitationReplicate by the
The competitive advantage of firms lies with its managerial andorganizational processes, shaped by its (specific) asset position,and the paths available to it.
How firms
achieve andsustaincompetitiveadvantage?
A difficult-to-replicate ordifficult-to-imitatecompetence must be builtbecause it cannot be bought.
DYNAMIC CAPABILITIES FRAMEWORK
Dynamic Capabilitiesand Strategic ManagementTeece D., Pisano G., and Shuen A. 1997.
the way things are done(routines, patterns of practice and learning)
current specific endowments(technology, complementary assets, customer base, external relations)
strategic alternatives(presence or absence of increasing returns and attendant path dependencies)
Processes
Positions
Paths
Positions
Coordination/integration
Learning
Market(structure) Assets
Organizational and managerial processes
The firm’s processes andpositions collectivelyencompass its competencesand capabilities.
Financial Assets Organizational processes, shaped by the firm’s asset positions and molded by paths, explain the essence of the firm’s dynamiccapabilities and its competitive Advantages.
Technological AssetsComplementary Assets
Institutional Assets
Path Dependencies
Tech. Opp.
Reputational Assets
Structural Assets
Reconfiguration & TransformationPaths
Dynamiccapabilitiescan be seen as anemerging andpotentiallyintegrativeapproachto understandingthe newer sourcesof competitiveadvantage.
Dynamic Capabilities Models
Please click here
.
Key to summarize:
• ‘Dynamic Capabilities' approach is to stressexploiting existing internal and external firmspecific competences to address rapidlychanging environments.
• It emphasizes the development ofmanagement capabilities, and difficult-to-imitate combinations of organizational,functional and technological skills.
Key Question to think:How some organizations first develop firm-specific capabilities and how they renewcompetences to respond to shifts in thebusiness environment? (business processes,Market positions, expansion paths)
Key point:To be strategic, a capability must be honed toa user need, unique and difficult to replicate.
CRITIQUES• Logical Conceptual Framework• Tautological• Dynamic Capabilities - the firm's ability to
integrate, build and reconfigure internal andexternal competences to address rapidly changingenvironments
• Difficult to operationalize• Lack of algorithm
to translate environmental factors into capabilities model• Path dependency
CRITIQUES
Three other main components of dynamic capabilities have not been incorporated in this framework i.e. adaptive capability (Miles and Snow 1978; Chakravarthy 1982; Hooley et al., 1992), absorptive capability (Cohen and Levinthal, 1990) and innovative capability (Wang and Ahmed 2004).
CRITIQUES This article reflects all about the rapid technological
change only. Dynamic market environment can also be caused by regulatory change, economic change and the changing competitive nature of the industry.
It should take full advantage of the four paradigms to solve complex problems …organized complexity (Mason and Mitroff, 1981).
CRITIQUES Another very important perspective needs to be well
thought-out is knowledge management and Organizational Learning. Crossan et al., (1999) provided a very famous 4I’s model and reported that
ideas (tacit-knowledge) initiate from individual after conceptualization it is
discussed in teams and groups, then after some amendments it gets
legitimized (agreed upon) status for an organization and becomes routine,
process or law (explicit-knowledge).
This is a cyclical process around tacit- explicit-tacit knowledge; Nonaka’s
(1994) SECI model may be consulted to the phenomenon of ‘knowledge
spiral’.
Discussion
1. At which point should a firm decide thatinstead of constantly adjusting tochanging environments, its time toadapt the environment to its capabilitiesand competences?
2. Do you believe that these four differentstrategic approaches arecomplementary or competitive?
REFERENCES• Argyris, C., Schon, D. (1978). Organizational Learning. Reading: MA: Addison-Wesley.• Baskerville and Dulipovici, (2006). The Theoretical Foundations of Knowledge Management.
Knowledge Management Research & Practice. 4,83-105.• Crossan, et al., (1999). An Organizational Learning Framework: From Intuition to Institution.
Academy of Management Review, 24(3), 522-537.• Covin and Slevin, (1989). Strategic Management of Small Firms in Hostile and Benign
Environments. Strategic Management Journal. 10, 75-87.• Daft R. L. and Weick, K. E. (1984).Toward a Model of Organizations as Interpretation Systems.
Academy of Management Review, 9, 284-295.• Hatch, M. J. (Ed.).(1997). Organization Theory. Great Clarendon Street: Oxford University Press.• Kitapci, H., Aydin, B. and Celik, V. (2012). The Effects of Organizational Learning Capacity and
Innovativeness on Financial Performance: An Empirical Study. African Journal of Business Management, 6(6), 2332-2341.
• Levitt and March, (1988). Organizational Learning. Annual Review Social. 14, 319-340.• Mason and Mitroff, (1981). Complexity: The Nature of Real world Problems. Challenging
Strategic Planning Assumptions. Winley, New York.• Miles, et al., (1978). Organizational Strategy, Structure and Process. Academy of Management
Review. 3(3), 546-562.• Nonaka and Peltokorpi, (2006). Objectivity and Subjectivity in Knowledge Management: A
Review of 20 Top Articles. Knowledge and Process Management. 13(2), 73-82
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