Dynamic Capabilities and Strategic Management

A Discussion of :

Teece D., Pisano G., and Shuen A. 1997.

Dynamic Capabilities and Strategic Management. Strategic Management Journal, 18, 7, 509-534.*

2009 INNOVATION MANAGEMENT SEMINAR 4

ON THE NATURE OF TECHNOLOGICAL KNOWLEDGE AND ITS IMPLICATIONS FOR SPECIALISATION AND INNOVATION

Prepared by

Andreas Paparitsidis, Bac Hoai tran, Hsuan-Yi Wu (Jen), and Phillip C. Jackson

OCT. 30, 2009 12009 INNOVATION MANAGEMENT BMAN71471

“Never mind ! Let’s get it to market first.“

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CRITIQUES (PHILLIP)

CONCLUSION AND DISCUSSION (ANDREAS)

TOWARD A DYNAMIC CAPABILITIES FRAMEWORK (JEN)- Markets and strategic capabilities

- Processes, positions, and paths

- Replicability and imitatability of organizational processes and positions

INTRODUCTION (BAC)- Models of strategy

1. emphasizing the exploitation of market power

(competitive forces, strategic conflict)

2. emphasizing efficiency

(resource-based perspective, dynamic capabilities approach)

OCT. 30, 2009 22009 INNOVATION MANAGEMENT BMAN71471

Teece D

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Dynamic Capabilities and Strategic ManagementTeece D., Pisano G., and Shuen A. 1997.

32009 INNOVATION MANAGEMENT BMAN71471OCT. 30, 2009

-Introduce three existing paradigms

- Competitive forces

- Strategic conflict

- Resource-based

• And an emerging new paradigm – ‘dynamic capabilities’

- Processes, positions, and paths

- Replicability and imitatability of organisational processes and positions

• - Are they interrelated – complementary or competitive?

• - Future directions?

INTRODUCTION

Dynamic Capabilities and Strategic Management


David J. Teece

GARY PISANO

AMY SHUEN

- Purpose

To provide a coherent framework which can both integrate existing conceptual and empirical knowledge and facilitate prescription.

- Assumption

Firms can achieve and sustain competitive advantage by developing the dynamic capabilities approach to address rapidly changing environments.


- Definition

• The term dynamic refers to the capacity to renew competences so as to achieve congruence with the changing business environment.

• The term capabilities emphasizes the key role of strategic management in appropriately adapting, integrating, and reconfiguring internal and external organizational skills resources and functional competencies to match the requirements of a changing environment.




- Definition

• The term dynamic capabilities refers to the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environment.

• It reflect an organization’s ability to achieve new and innovative forms of competitive advantage given path dependencies and market positions.



DYNAMIC CAPABILITIES FRAMEWORK


current specific endowments (technology, IP, complementary assets, customer base, external relations)

the way things are done (routines, patterns of practice and learning)

strategic alternatives (presence or absence of increasing returns and attendant path dependencies)

Processes

Positions

Paths



paths

processespositions

A difficult-to-replicate or difficult-to-imitate competence must be built because it cannot be bought.

imitation

replication

Transferring or redeploying competences from one concrete economic setting to another

Replicate by the firm itself or its competitors

The competitive advantage of firms lies with its managerial and organizational processes, shaped by its (specific) asset position, and the paths available to it.

How firms achieve and sustain competitive advantage?

DYNAMIC CAPABILITIES

Organizational and managerial processes

Paths

Positions

Reconfiguration & transformation

Learning

Coordination/integration

Technological assets Path dependencies

Technological opportunitiesComplementary assets

Financial assetsReputational assets

Structural assetsInstitutional assets

Market (structure) assets


The firm’s processes and positions collectively encompass its competences and capabilities.

Organizational processes, shaped by the firm’s asset positions and molded by paths, explain the essence of the firm’s dynamic capabilities and its competitive advantages.


Dynamic capabilities can be seen as an emerging and potentially integrative approach to understanding the newer sources of competitive advantage.



Key Question to think:

How some organizations first develop firm-specific capabilities and how they renew competences to respond to shifts in the business environment? (business processes, Market positions, expansion paths)

Key point:

To be strategic, a capability must be honed to a user need, unique and difficult to replicate.



• Logical Conceptual Framework

• Tautological• Dynamic Capabilities - the firm's ability to

integrate, build and reconfigure internal and external competences to address rapidly changingenvironments

• Difficult to operationalize• Lack of algorithm to translate environmental

factors into capabilities model• Path dependency and the reconfiguration dynamic


CRITIQUES


• A definition of dynamic capabilities should go beyond a reference to competence and routines to include the firm’s ability to readapt established routines in order to respond to the environmental changes

• It should take advantage of the four paradigms to solve complex problems


CRITIQUES


Key to summarize:

• ‘Dynamic Capabilities' approach is to stress exploiting existing internal and external firm specific competences to address rapidlychanging environments.

• It emphasizes the development of management capabilities, and difficult-to-imitate combinations of organizational, functional and technological skills.


Paradigms of Strategy: Salient Characteristics



Discussion


1. At which point should a firm decide that instead of constantly adjusting to changing environments, its time to adapt the environment to its capabilities and competences?

2. Do you believe that these four different strategic approaches are complementary or competitive?


Title Dynamic capabilities: understanding strategic change in organizations

Authors Constance E. Helfat, Sydney Finkelstein, Will Mitchell, David J. Teece…

Edition Illustrated

Publisher Wiley-Blackwell, 2007

ISBN 1405159049, 9781405159043

Length 147 pages

Title Dynamic Capabilities and Strategic Management: Organizing for Innovation and Growth

Author David J. Teece

Edition illustrated

Publisher Oxford University Press US, 2009

ISBN 019954512X, 9780199545124

Length 272 pages


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Dynamic Capabilities and Strategic Management