Organizational routines and capabilities: Historicaldrift and a course-correction towardmicrofoundations

Teppo Felin a,*, Nicolai J. Foss b,c

aMarriott School of Management, Brigham Young University, 587 TNRB, Provo, UT 84602, United StatesbCenter for Strategic Management and Globalization, Copenhagen Business School, Porcelainshaven 24B,2000 Frederiksberg, DenmarkcDepartment of Strategy and Management, Norwegian School of Economics and Business Administration,Breiviksveien 40, N-5045 Bergen, Norway

Scandinavian Journal of Management (2009) 25, 157—167

KEYWORDSOrganizational routinesand capabilities;Strategy;Microfoundations;Aggregation;Intentionality

Summary Organizational routines and capabilities have become key constructs in fields such asorganization studies, strategic management, international business, and technology manage-ment, as well as certain parts of economics. We discuss the historical origins of the notion ofroutines and highlight some of the theoretical drift associated with the notion of routines overtime. In particular, we note how recent routines-based work has unnecessarily moved the focus(1) from the individual to the collective level, (2) from intentional behavior to unintentionalbehavior, and (3) from the observable to the non-observable dimension. In parallel we alsoexplicate the underlying theoretical problems of the concept of organizational routines (andassociated constructs, such as capabilities); problems such as the lack of conceptual clarity on theorigins of routines, and the more general need for microfoundations. We argue that the under-lying, individual-level micro-components and interactional dynamics deserve more attention inextant work–—calling in effect for a course-correction in work on organizational routines andcapabilities. We highlight how an emphasis on (1) the origins of routines, (2) intentionality andexceptions, and (3) aggregation and emergence, provide opportunities to course-correct futureresearch on organizational routines and capabilities.# 2009 Elsevier Ltd. All rights reserved.

ava i lab le at www.sc ienced i rect .com

journa l homepage: ht tp://www.e l sev ier.com/locate/scaman

* Corresponding author.E-mail addresses: teppo.felin@byu.edu (T. Felin),

njf.smg@cbs.dk (N.J. Foss).

0956-5221/$ — see front matter # 2009 Elsevier Ltd. All rights reservedoi:10.1016/j.scaman.2009.02.003

Introduction

In just over 25 years the notion of organizational routines hasbecome a central construct in various fields in management.The most frequently cited source of this construct is Nelsonand Winter (1982). The routines construct appears in man-agement research both as a key independent variable in itsown right (driving organizational performance) and as a

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158 T. Felin, N.J. Foss

building-block for higher level concepts such as organiza-tional capabilities (e.g., Nelson & Winter, 1982; Teece,Pisano, & Shuen, 1997; Winter, 2003; Zollo & Winter,2002).1 While strategic management (e.g., Eisenhardt &Martin, 2000; Teece et al., 1997) and organizational theory(Pentland, 1995; cf. Biggart & Beamish, 2003; Levitt & March,1988) have perhaps been the most frequent users of theroutine construct, the routine construct has also enjoyedwidespread acceptance and application in, for example,technology management (Henderson & Cockburn, 1994)and international business (Kilduff, 1992). The construct isalso prominent in heterodox economics — mainly evolution-ary economics in which it arguably originated (Cohen et al.,1996; Nelson & Winter, 1982) — and even mainstream econ-omists make use of the routines construct (e.g., Milgrom &Roberts, 1992, pp. 273—277).

Given the prominence of the routines construct in variousliteratures, the purpose of this article is to offer a historicallyinformed, though in part critical, look at this importantconstruct and its derived variants (such as capabilities). Inparticular, we note some quite significant historical drift inhow the routines construct has been theoretically concep-tualized over time. This historical drift has made the defini-tion, measurement and application of the routine conceptproblematic. We focus specifically on the missing microfoun-dation in extant work on routines and capabilities, which inturn has led to a lack of work on the origins of organizationalroutines and capabilities. While skeptical looks at routinesand similar constructs have been offered previously (e.g.,Felin & Foss, 2005; Foss, 2003; Williamson, 1999) — in fact,even proponents of the notion of routines have themselvesoften admitted to the definitional difficulties (e.g., Cohenet al., 1996; also see Becker, 2004, p. 643) and the opera-tional difficulties (e.g., Dosi, Nelson, & Winter, 2000) thatsurround the concept2 — we not only extend some of theseextant critiques, but we also highlight new, and we believe,more fundamental matters as well. In particular, we arguethat the definitional, terminological, and operational pro-blems that characterize the routine construct ultimatelyderive from a more fundamental problem of the lack ofmicrofoundations. That is, there has been an increasingamount of focus on the collective aspects of routines, atthe expense of key, individual-level considerations related tointention and choice. The problem ofmicrofoundations mightexplain why— in spite of over two decades of theoretical (andsome empirical) work, as well as recent efforts to clarify themeanings of organizational routines and capabilities (e.g.,Cohen et al., 1996; Dosi et al., 2000; Eisenhardt & Martin,

1 While Nelson and Winter (1982, Chapter 5) think of capabilities ashigher level than routines, Dosi et al. (2000, p. 4) indicate thatroutines and capabilities are strongly overlapping constructs: ‘‘. . . wethink of ‘capability’ as a fairly large-scale unit of analysis, one thathas a recognizable purpose expressed in terms of the significantoutcomes it is supposed to enable, and that is significantly shapedby conscious decision both in its development and deployment.These features distinguish ‘capability’ from ‘organizational routine’. . . subject to the qualification that some organizational routines mayequally well be called capabilities.’’ Most of what we say in thefollowing about routines also applies to capabilities.2 As Becker rightly notes, ‘‘[d]espite (or because) of its increasing

popularity, many ambiguities and inconsistencies in the literaturedealing with routines prevail still today’’ (Becker, 2004, p. 643).

2000; Helfat & Peteraf, 2003; Winter, 2003; Zollo & Winter,2002; Zott, 2003) — fundamental questions about the originsand foundations of routines, and therefore the theoreticaland empirical status of the approach, still persist. We expli-cate some of the deficiencies of current routines and cap-abilities-based work, focusing on those that stem from itsreliance on a methodological collectivist mode of theorizing(see Zollo and Winter’s (2002) definition, or Becker’s (2004)overview highlighting collective elements), which suppressesindividual-level considerations, including matters related toindividual action, interaction and intentionality. Overall, theeffort here is not meant to be overly critical. Rather, oureffort can be seen as a call for new research which morecarefully specifies the origins and emergence of collective-level constructs such as organizational routines and capabil-ities via constitutive microfoundations.

Overall, we begin this article by highlighting extantdefinitions of organizational routines. Thereafter we pro-vide a brief history of the notion of routines and relatedconstructs. Specifically, scholars who make use of the rou-tine construct often highlight that their intellectual founda-tions are in early behavioral organization and managementtheory (notably, Cyert & March, 1963; March & Simon, 1958;Simon, 1945), and thus the conceptual origins of routines, itis suggested, emerge from closely related constructs such as‘‘programs.’’ However, as we will note, there has been someunfortunate, historical drift in how routines have beenconceptualized. Specifically, we will argue that historicallythere has been an overall tendency in the routines literatureto change the interpretation of the relevant patterns ofbehaviors (1) from the individual to the collective level,(2) from intentional to unintentional factors, and (3) fromthe observable to the non-observable dimension. We arguethat the theoretical development and usefulness of theroutines notion has not necessarily been furthered by thesehistorical developments. We end by outlining some ideas foran alternative research program that is more explicit aboutthe microfoundations and origins of organizational routinesand capabilities.

Routines: definitions and a brief history ofthe construct

Routines have been defined in many different ways. In thebroadest of terms, Winter defines routines as ‘‘ways of doingthings’’ (Winter, 1986, p. 165). Other definitions include‘‘ordered sets of actions’’ or ‘‘grammars of action’’ (Pentland& Rueter, 1994, p. 489). Cohen and Bacdayan, on the otherhand, suggest that routines are ‘‘patterned sequences oflearned behavior involving multiple actors who are linkedby relations of communication and/or authority’’ (Cohen &Bacdayan, 1994, p. 555). The focus, clearly, in all of thesedefinitions is on order, repetition, interdependence and pat-terns. In a recent review of the routines literature over thelast two decades, Becker (2004) indeed argues that routinesare usually broadly defined as ‘‘patterns.’’ However, asBecker notes, it is not always clear whether these patternsdenote non-observable, individual-level ‘‘habits of thought’’or observable, individual-level ‘‘habits’’ or collective-level,non-observable thought patterns or observable recurrentinteraction patterns.

Organizational routines and capabilities: Historical drift and a course-correction toward microfoundations 159

A problem in the routines literature, then, is that clearand specific definitions of routines and capabilities are insomewhat short supply. Specifically, it is notable that whenscholars try to proffer definitions, they often pack so muchinto routines and capabilities that they effectively becomeidentical to the organization itself, or routines are equatedwith others constructs such as heuristics, strategies, organi-zational processes and arrangements, cognitive issues (e.g.,‘‘organizational memories’’), and incentives (‘‘truces’’)(Levitt & March, 1988; Nelson & Winter, 1982). Still, thedefinition that perhaps best captures current understandingis the one put forward by Cohen et al. (1996). They define aroutine as ‘‘. . . an executable capability for repeated per-formance in some context that has been learned by anorganization in response to selective pressures’’ (Cohenet al., 1996, p. 683).3 As the quotation suggests, routinesare collective (usually, organization) level constructs thatembody prior learning, and are environmentally activatedand selected for.

Though definitional problems have persisted (as alsopointed out by those who advocate routines: Becker, 2004,2007), nonetheless it must be recognized that routines haveserved a rather fundamental role in organizational research.Many have even argued that routines are ‘‘the central unit ofanalysis’’ (Becker, 2004, p. 643; cf. Nelson & Winter, 1982).Furthermore, the routines construct indeed has also becomethe explicit foundation for capabilities-based work in stra-tegic management (e.g., Collis, 1996; Eisenhardt & Martin,2000; Zollo & Winter, 2002). Overall, then, routines areexplicitly argued to be the most ‘‘micro’’ and fundamentalunit of analysis for various literatures of strategic organiza-tion.

The current conception of routines is heavily grounded inthe evolutionary economics of Nelson and Winter (1982). Inparticular, the routines concept more generally is linked tothe influential evolutionary triad of variation (i.e., varia-tion in routines across a population of firms), selection (i.e.,changes in the relative weights of routines in this popula-tion), and heredity (i.e., the notion of routines as the socialequivalent to genes). However, while the work of Nelsonand Winter specifically builds on earlier work on the beha-vioral theory of the firm (e.g., March & Simon, 1958),nonetheless their work is partly at variance with this earlierwork. Specifically, there has been some historical drift andevolution in how routines (and ‘‘programs’’) have beentreated and conceptualized in subsequent organizationalliterature. Thus, we will next discuss this historical drift inhow routines have been conceptualized and highlight asso-ciated problems and opportunities for future research. Inall, we suggest that returning to earlier conceptions such asindividual decision-making and individual action and inter-action might be warranted. More generally we highlighthow extant work on organizational routines and capabilitiesmight benefit from carefully explicating its underlyingmicrofoundations.

3 This is consistent with, but broader than, Winter’s early defini-tion: ‘‘Pattern of behavior that is followed repeatedly, but is subjectto change if conditions change’’ (1964, p. 263).

Behavioralism and the emergence of the routinesconstruct

Contributors to the organizational routines literature ofteninvoke the work of behavioralist organization theorists, nota-bly Herbert Simon, James March and Richard Cyert (e.g.,Dosi, 2000; Knudsen, 2004; Nelson & Winter, 1982). Nelsonand Winter are quite explicit about their indebtedness to thebehavioralist tradition. For example, when discussing ‘‘theneed for an evolutionary theory,’’ they observe that their ‘‘. . .basic critique of orthodoxy is connected with the boundedrationality problem’’ (p. 36), and that, therefore, they ‘‘. . .accept and absorb into [their] analysis many of the ideas ofthe behavioral theorists’’ (pp. 35—36). In particular, they areattracted to the behavioralist notion that short and mediumrun firm behavior is determined by simple decision rules(Cyert & March, 1963).4 They also make use of behavioralistmodels of satisficing search (Simon, 1955). In a later con-tribution, Nelson and Winter note that ‘‘[t]he view of firmbehavior built into evolutionary economic theory fits wellwith the theory of firms contained in modern organizationtheory, especially the part that shares our own debt to the‘Carnegie School’ (March and Simon, 1958; Cyert and March,1992)’’ (2002, p. 42). If one wants to read Nelson and Winter(1982) as a continuous development from the behavioralists(as Pierce, Boerner, & Teece, 2002 do), Nelson and Winterextend behavioralism by examining populations of firms(rather than single firms or oligopolistic interaction) withdifferent routines, by addressing the interplay betweenchanging external environments and changing routines,and by trying to bring bounded rationality together withtacit knowledge in the notion of routine (the behavioralistsdid not stress tacit knowledge, cf. Foss, 2003).5 Such areading is evidently one in which Nelson and Winter’s (andother writers’) work is a continuous extension of the earlierwork of the behavioralists.

We question this interpretation (see also Cohen, 2007).While there can be no doubt that modern work on organiza-tional routines is in some important dimensions criticallyindebted to behavioralism in organizational theory, in someother equally important dimensions, it represents a depar-ture from behavioralism. Perhaps the most important way inwhich later work has departed is that it breaks with thenotion of individual-level microfoundations. Thus, the notionof routines as it is being used by contemporary writers breakswith this idea by taking routines (and capabilities) as expla-natory primitives. In contrast, behavioralism as stated in theclassical works of Simon (1945), and March and Simon (1958)included a call for building organizational theory on explicitmicrofoundations based on boundedly rational behaviors ofindividuals. Modern work on organizational routines, how-ever, goes significantly beyond these alleged precursors bydirectly stressing the collective, often non-intentional, tacit,and non-observable aspects of routines, and by neglecting tobuild a foundation for routines in individual-level considera-

4 Winter (1964) wrote an early and favorable review of Cyert andMarch (1963). In a later paper (Winter, 1986), he is keen to placeNelson and Winter (1982) in the behavioralist tradition.5 The behavioralists did not stress tacit knowledge (cf. Foss, 2003),

and the notion of tacitness as an important and inescapable dimen-sion of action is antithetical to at least Simon’s thinking.

160 T. Felin, N.J. Foss

tions. To see this, briefly consider Simon (1945), March andSimon (1958) and Cyert and March (1963).

In his seminal contribution to organizational theory, Simon(1945) makes continuous reference to the standard econom-ics model of the rational agent as a sort of benchmark.Although his development of the notion of ‘‘administrativeman’’. . . as one whose beliefs and values can be influenced byconscious management. . . goes rather significantly beyondthis benchmark, it is in no way Simon’s intention to breakwith the reductionist mode of explanation that is character-istic of economics. Indeed, his whole view of administrativebehavior revolves around the individual, taken up as it is with‘‘. . . the factors that will determine with what skills, values,and knowledge the organization member undertakes hiswork. These are the ‘limits to rationality’ with which theprinciples of administration must deal’’ (1945, p. 46). Tell-ingly, Simon’s discussion of ‘‘group behavior’’ (1945, pp. 80—82) is also entirely consistent with methodological individu-alism, specifically where group-level activities are specifiedby trying to understand the underlying characteristics, incen-tives and actions of the individual involved (rather thanalluding to higher level constructs).6

March and Simon (1958) mention ‘‘routine’’ a number oftimes, mainly in connection with the ‘‘theory of rationalchoice put forth here’’ (p. 160); thus the connection toindividual-level behavior is explicitly established. There isa brief mention of ‘‘activities’’ being routinized, but it isunclear from the context whether this refers to organiza-tional activities or individual activities. It would be strange ifSimon’s fascination with the computer was not reflected inhis contributions to organizational theory–—and, of course, itis. For example, in March and Simon (1958) there is a longdiscussion of ‘‘performance programs in organizations.’’ Thisis where they come closest to later discussions of routines andcapabilities. However, although they emphasize that perfor-mance programs will be reflected in the minds of employees,and thus have a cognitive component, they stress that pro-grams may ‘‘function as control’’ (which requires specifica-tion of ‘‘variables that are observable and measurable,’’p.166) and may ‘‘contain specifications of quality and quan-tity’’ (p. 166), and therefore are very largely designed and‘‘rationally adapted to the organization’s objectives’’ (p.167) (depending on how bounded rationality is).

Cyert and March (1963, p. 1) open their book by explainingthat it is ‘‘. . . about the business firm and the way it makeseconomic decisions.’’ They quickly move on to address thefamiliar problem of how goals can meaningfully be ascribedto organizations (cf. Simon, 1964). They do so from a meth-odological individualist perspective, stressing, among otherthings, bargaining and side-payments between organiza-tional members as important features in the process ofcreating goals that can be ascribed to collectives (i.e.,coalitions) (also see Simon’s 1957 related discussion of ‘‘indu-

6 In a comment written much later, Simon (1945/1997, p. 89) onlyrefers once to routines, citing Nelson and Winter (1982). However,Simon seems to have standard operating procedures in mind, and hepoints out that the ‘‘. . . establishment of such rules and routines isitself a rational decision, and when we speak of rationality inorganizational decision-making, we must include them and the pro-cess for establishing them.’’ Thus, routines are designed and rationalcriteria for their design can be formulated.

cements and contributions’’; also see March, 1962). Collec-tive-level entities (e.g., their notions of organizational‘‘goals,’’ ‘‘expectations’’ and ‘‘behavior’’) are clearlyfounded in individual-level considerations. This is also thecase for the construct that is sometimes seen in the con-temporary organizational routines literature as a precursorfor the notion of routines, namely ‘‘standard operating pro-cedures.’’ Cyert and March’s examples of such proceduresand how they are composed are very concrete ones, such asexplicit task performance rules, records and reports, plan-ning rules, and so on. Note that these are all examples ofconcrete, explicit rules that have been consciously designed(although they are modified in the light of their effects).

The upshot of this brief doctrinal history is that claimingthat Nelson and Winter (1982) and subsequent work foundedon the notion of routines derive from the earlier behavior-alism of Simon, Cyert and March turns out, in some respects,to be problematic. One can indeed find shared themes, someof which are important (Pierce et al., 2002), but in a numberof other aspects — that we consider to be crucial — there aredivergences. Thus, in contrast to later work, the behavior-alists do not see routines as largely difficult-to-observe andmainly cognitive entities. And importantly, whereas thebehavioralists adhered to methodological individualism inthe sense that they argued that social theory must beginfrom individual action and interaction, later theorists work-ing on routines and capabilities have — more or less con-sciously — abandoned this principle.7

Nelson and Winter on individual skills andorganizational routines

One way in which Nelson and Winter (1982) closely mirrorMarch and Simon (1958) and Cyert and March (1963) is bydeveloping their theory on the basis of a critique of andcomment on ‘‘orthodoxy,’’ notably the neoclassical theory ofthe firm (i.e., the basic production function framework foundin economics textbooks). However, there is an importantdifference here: Whereas the behavioralists mainly tookissue with this theory because of its simplistic portrayal ofrationality and of decision-making in organizations, Nelsonand Winter’s main problem with orthodox theory is that firm-level heterogeneity is at best exogenously determined andmore likely suppressed because of the constraining assump-tions of neoclassical production theory. . . therefore, it can-not form the basis of an evolutionary theory. In other words,the critical points of departure relate to phenomena atdifferent levels of analysis: the behavioralists critique eco-nomic orthodoxy because it fails to adequately and realisti-cally deal with rationality and decision-making, while Nelsonand Winter critique it because it fails to account for firm-level heterogeneity.

To be sure, a theory of endogenous firm-level heteroge-neity may conceivably be constructed from explicit beha-vioralist foundations (and for such attempts, see Egidi, 1996;Egidi & Narduzzo, 1997). Thus, the level of the individual andthe level of the firm can be bridged, and to perform such a

7 Foss (1998) argues that the work of Thorstein Veblen is perhapsthe most obvious precursor of routines and capabilities work. Seealso Becker (2007) for a discussion of precursors.

Organizational routines and capabilities: Historical drift and a course-correction toward microfoundations 161

bridging has long been seen as a critical aim of organizationaltheory. However, this is not, it turns out, what Nelson andWinter are trying to do. Instead, they begin, not from anexplicit theory of bounded rationality, but from the notion of‘‘skills,’’ to the analysis of which they devote a whole chapter(Nelson &Winter, 1982, Chapter 4). By a skill, they mean ‘‘. . .a capability for a smooth sequence of coordinated behaviorthat is ordinarily effective relative to its objectives, giventhe context in which it normally occurs’’ (1982, p. 73).8,9

Of course, skills reside in individuals. However, this indi-vidual-level aspect is not the reason why Nelson and Wintertake an interest in skills. Rather, the attraction for Nelson andWinter of the notion of skill seem to be the following. First,skills and their (alleged) organization-level counterparts —routines — allow Nelson and Winter to introduce the rigidityin the behavioral repertoire that is necessary in an evolu-tionary approach, the argument being that skilled behaviorimplies specialization which in turn implies reduced flexibil-ity/rigidity. Second, skills involve tacit knowledge that maybe transferred through apprenticeship-like mechanisms. Thenotion of skill therefore introduces an analogy to heredity.10

Third, and perhaps most importantly, the notion of skills isused by Nelson and Winter to establish a link betweenindividual action and organizational behavior. However,the link between individual skills and organizational routinesis explicitly developed in a metaphorical manner: ‘‘. . .directly relevant to our development here is the value ofindividual behavior as a metaphor for organizational beha-vior’’ (1982, p. 72; emphasis in original). In turn, ‘‘organiza-tional behavior’’ is addressed in terms of ‘‘routines’’ thatserve as organization-level metaphorical equivalents to indi-vidual skills. Note, however, that unlike Simon’s work (e.g.,Simon, 1964; also see March, 1962), direct links betweenindividuals and organizations are not made substantively ortheoretically. Because the routines literature goes directly tothe social level, it raises important questions about theunderlying, individual-level dynamics such as motivation,ability, etc. The routines, literature, then, essentially simplysidesteps issues related to individual motivation, etc,directly postulating that routines represent ‘‘organizationaltruces.’’ However, rather than taking the existence of thesetruces for granted, a key question, of course, is how thesetruces might emerge in the first place. Furthermore, the

8 While skills provide an analogy to the behavioralist notion thatbehavior is often guided by relatively rigid decision rules, the notionis not derived from considerations of bounded rationality.9 Notice how the definition of routines given by Cohen et al. (1996)

(as cited in Introduction) almost repeats verbatim this definition ofskills.10 As Knudsen (2004, p. 2) argues, ‘‘. . . routines are persistentcontainers of encoded instructions for behavior or thought. Whenthis information is passed on . . . routines can function as replica-tors.’’ The Nelson and Winter (1982, pp. 134—136) notion of ‘‘rou-tines as genes’’ also makes this point; as they note, ‘‘[e]ssentialcoordinating information is stored in the routine functioning of theorganization’’ (p. 134). While Knudsen (2004) is careful to note thatindividual level skills may also qualify as ‘‘persistent containers ofencoded instructions,’’ most proponents of evolutionary economicshave followed Nelson and Winter in conceptualising the basic ‘‘con-tainer’’ as organization level, collective, mainly tacit routines. Pre-sumably, the underlying idea is that the ‘‘phenotype’’ is representedby the firm and it is the firm that is subject to direct selection.

argument by Nelson and Winter is that organizational rou-tines, like individual skills, represent stable sequences ofactions (i.e., they coordinate actions) that are triggered bycertain stimuli in certain contexts and that, in a sense, serveas memories for the organizations that embody them.

A central problem is that Nelson and Winter’s treatmentpacks quite a bit into the routines construct, including avariety of behaviors (e.g., heuristics and strategies), orga-nizational processes and arrangements, cognitive issues(e.g., ‘‘organizational memories’’), and incentives(‘‘truces’’) (cf. Becker, 2004, 2007). This is considerably moreambitious and far-reaching than the more straightforwardinterpretations of the standard operating procedures ofCyert and March (1963). The reason for this all-inclusivenessarguably is that ‘‘routine’’ is a catchall concept for thosecollective-level aspects of an organization that may contri-bute to the relative rigidity of firm-level behavior that is soimportant in Nelson and Winter’s theory.

The inclusive nature of the routines construct is an impor-tant reason for the relative confusion that has characterizedthe subsequent organizational routines literature (as docu-mented by Becker, 2004) and related literatures, notably theorganizational capabilities literature in strategic manage-ment (Felin & Foss, 2005).

A key source of problems that we focus on in the followinglies in the absence of a clear foundation, rooted in theories ofindividual action and interaction, for the notion of routines.As indicated, this problem is also manifest in Nelson andWinter (1982). Although bounded rationality — which isobviously an individual-level construct — is frequentlyinvoked in the book, very little real use is made of it, and,in general, it is fair to say that there simply is no micro-foundation for the key collective-level constructs of routinesand capabilities in Nelson and Winter (1982).

Nelson and Winter explicitly argue that ‘‘[I]n contrast tothe usual quest for microfoundations in economics, seekingconsistency with rationality assumptions, our quest is forconsistency with the available evidence on learning andbehavior at both the individual and organizational levels’’(2002, p. 31). It turns out that what they mean by the‘‘available evidence’’ is somewhat idiosyncratic: They goon to argue, in this paper, that ‘‘[w]ith respect to individuallearning, the plausibility of our behavioral foundations forevolutionary economics has received support from an unex-pected quarter. Studies linking cognitive abilities and brainphysiology have established the existence of anatomicallydistinct memory processes supporting the skilled behaviors ofindividuals’’ (Nelson &Winter, 2002, p. 33).11 Not only is suchmemory ‘‘highly durable,’’ it also ‘‘. . . functions in some waysthat are alien to theories of calculative rationality’’ (p. 34).

While the cognitive sciences seem to provide compellingsupport for the notion of skilled behavior, the evidence thatNelsonandWinterpresent in support for the criticalmove fromindividual skilled behavior to organizational routines (or thecollective-level) is less convincing. The only cited evidence isan experimental study of card-playing teams (Cohen & Bac-dayan, 1994) that demonstrated that team-level skills (i.e.,‘‘routines’’) acquired under one specification of the playedgamemade the adaptation to a new specification of the game

11 No references are given, but presumably they have in mind thekind of work described in Damasio (1994).

13 Collectivists, on the other hand, argue that culture, institutions,and other collective phenomena are sui generis and thus must be

162 T. Felin, N.J. Foss

sluggish. While this has much to do with skilled and inertialbehavior and problems of adaptability in teams, it is not clearwhat exactly all this has to do with bounded rationality.Similarly, its implications for organizations are unclear.

From routines to capabilities

During the 1990s, the routine construct became increasinglycentral to a number of fields in management, not only in itsown right, but also as an input in theory development con-cerning competencies and dynamic capabilities. Resource-based scholars in strategic management argued that routineswere key examples of those ‘‘socially complex’’ and tacitresources that, they argued, were particularly likely tosustain competitive advantages (Barney, 1991; Dierickx &Cool, 1989; also see Henderson & Cockburn, 1994). Moreimportantly, notions of competencies and dynamic capabil-ities were introduced to serve as higher level, meta- orsecond-order routines (Winter, 2003), a notion already antici-pated in Nelson and Winter’s (1982) treatment of ‘‘dynamicroutines.’’ Such routines or capabilities reflect the ability ofthe organization to reflexively revisit what it routinely does,particularly in dynamic, changing environments. Eisenhardtand Martin (2000) argue that these capabilities are relativelysimple rules that organizations follow and that they moreconcretely refer to such things as the ability to strike alli-ances or offer superior customer service. Thus, (dynamic)capabilities provide a more accurate conceptualization tohelp understand the dynamics of collective heterogeneity. Tosee how foundational the concept of routines is for organiza-tional capabilities, note Zollo and Winter’s definition: ‘‘Adynamic capability is a learned and stable pattern of collec-tive activity through which the organization systematicallygenerates andmodifies its operating routines in the pursuit ofimproved effectiveness’’ (2002, p. 340).

While higher order routines seem to make much intuitivesense, an important problem with the dynamic or organiza-tional capabilities literature, whether in evolutionary eco-nomics or in strategic management, is that it has prematurelymoved to higher level or higher order constructs, without firstbeing clear about the underlying routines construct itself.12

Thus, the effort has amounted to piling one enigma, routines,upon another, capabilities. Furthermore, both routines andcapabilities also have an extra-individual connotation, ormore directly, they are defined as collective (in particular,see Zollo and Winter’s definition above) and thus makeimplicit assumptions about individuals (cf. Nelson & Winter,1982, pp. 62—63).

Assumptions of routines and capabilities-basedresearch

Before delving more deeply into the underling assumptions ofroutines and capabilities-based work (cf. Felin & Hesterly,

12 This may be related to the tendency, noted by Williamson (1999),of this kind of work becoming mere retrospective story-telling–—oncea successful company is identified, capabilities are pointed out posthoc. Such sampling on the dependent variable is obviously proble-matic as it does not allow for theoretical prediction or falsification(Bacharach, 1989).

2007), it serves our purposes to highlight foundational workin the philosophy of social science on methodological indivi-dualismandcollectivism,and thepersuasivecasethathasbeenmade for the microfoundations of collective constructs andaggregate relations (for various discussions, see Coleman,1990; Elster, 1989; Little, 1998; O’Neill, 1973; Popper, 1959;Udehn, 2001, 2002). Our position throughout this paper una-bashedly has a leaning towardsmethodological individualism inthat we stress the need to build microfoundations rooted inindividual action and interaction, specifically as they arerelated toexplainingmacro-outcomes. Furthermore,wearguethat macro-level explanation is deficient without individual-level origins and mechanisms (cf. Abell, Felin, & Foss, 2008):seeming relations between macro-constructs (e.g., routinesand competitive advantage) are in actuality conjunctions ofmicro-level mechanisms that involve individual action andinteraction (Coleman, 1990; Elster, 1989; Little, 1998). Thatsaid, we certainly do not want to discount any collective-leveleffects either; rather we simply argue that collective con-structs need to clearly specify their underlying assumptionsabout individuals and to account for potential causal micro-dynamics that give way to macro-outcomes.

Overall, for methodological individualists (e.g., histori-cally Hayek, 1955a and Popper, 1957 and more recentlyColeman, 1990 and Elster, 1989), explaining collective phe-nomena (whether structure, organizations, culture, or rou-tine) is ‘‘. . . to show how they arise as the result of the actionand interaction of individuals’’ (Elster, 1989, p. 13).13 To besure, methodological individualists are a diverse lot. Forexample, one disagreement within the overall methodologi-cal individualist program concerns the relative importance ofunintended versus intended social phenomena (contrast,e.g., Brennan and Buchanan, 1985; Hayek, 1973). In fact,those methodological individualists, like Hayek, who stronglystress unintended consequences may occasionally come closeto holding positions that smack more of collectivism than ofindividualism (e.g., Hayek, 1973; see also Caldwell, 2004).Such theorists may disagree with methodological individual-ism in its purest form, namely the position that only indivi-duals are real and that they ‘‘exhaust the social world’’without remainder (Kincaid, 1997).14 Many methodologicalindividualists do not espouse this strong form (Agassi, 1960;Little, 1998): they may concede independent existence tosupra-individual entities (Little, 1998) and are in any casequite willing to let collective constructs enter into explana-tions (e.g., Coleman, 1990). However, all insist that ulti-mately collective phenomena must be reduced to andexplained in terms of individuals, or at least that theseindividuals need to properly be accounted for even whenexplaining ‘‘emergent’’ outcomes — in short, considerationneeds to be given to individual endowments, intentions,

studied as real things (‘‘social facts’’), which somehow (strongly)directly determine individual action, desires, and outcomes (cf.Durkheim, 1982). Though, for an alternative reading of Durkheim,see Steven Lukes’ introduction to Durkheim (1982).14 In fact, some radical methodological individualists have advo-cated the complete reduction of all social phenomena to psycholo-gical analysis of the mental states and characteristics of individuals(‘‘psychologism’’ e.g., Watkins, 1952).

Organizational routines and capabilities: Historical drift and a course-correction toward microfoundations 163

desires, beliefs, expectations, and goals (cf. Boudon, 1998;Elster, 1989, 1998; Hayek, 1955b) — and, the interaction ofindividuals.

The distinction between methodological individualismand collectivism, then, relates directly to the question oforganizational routines as well, given that the routines lit-erature is heavily collectivist in nature. Howard Aldrich bestvets the full implications of this collectivist focus by suggest-ing that: (cf. Felin & Foss, 2005):

If we truly focused on routines, competencies, practicesand so on, we would not follow people anymore in ourresearch. Instead we would follow how competenciesspread, replicate, and insinuate themselves into organiza-tions. People would disappear from our equations (Mur-mann, Aldrich, Levinthal, & Winter, 2003, p. 27; emphasisin original).

Thus, when specifying a collective as the key level ofanalysis, the implicit assumption (made explicit by Aldrich inthe above quote) about individuals is that they are homo-geneous and unimportant to the theoretical endeavor ofexplanation (for a parallel discussion in the levels of analysisliterature, see Dansereau, Yammarino, & Kohles, 1999). Theassumption is that collective factors, heterogeneity, routinesand related constructs (e.g., practices or capabilities) driveoverall outcomes and ought to be the key focal point oforganizational analysis. The assumption, then, is not just thatindividuals do not matter, but more generally that individualsare homogeneous. As an example, Henderson and Cockburn(1994) implicitly presume in their highly cited article onorganizational capabilities that individuals are homogeneous— thus suggesting that turnover, for example, does notimpact organizational capability (also see Kogut & Zander,1992) — and that heterogeneous organizational factors, suchas routines, drive overall performance outcomes (see Felin &Hesterly, 2007). The assumption of individual homogeneity is,of course, potentially warranted in some settings, but whenthinking about heterogeneity in organizational performancethe assumption seems problematic. Can we, for example,truly assume that individuals are randomly distributed intoorganizational settings and that routines primarily drive out-comes? We suggest not. First and foremost, organizations aresupervenient to or composed of the individuals that make upthe organization: who is in the organization matters. Thus,for example, individual-level self-selection clearly plays arole in macro-outcomes. For example, one can readily pre-sume that a highly promising scientist has every incentive toselect into the best possible environment, thus challengingthe notion of random distribution and the associated assump-tion of individual homogeneity (cf. Dansereau et al., 1999)–—again, an underlying assumption in much of routine andcapabilities based work (see Stern, in press for an example).Simply put, self-selection suggests that organizationaleffects may be artefacts or epiphenomenon of individuallevel a priori inputs. That said, it most certainly is concei-vable that routines and capabilities indeed are the outcomesof social interaction, that they somehow develop in an‘‘emergent’’ manner as individuals interact. In other words,routines may emerge via the local interaction of boundedlyrational agents. However, these types of micro-dynamics andmechanics have not been explicated–—in short, the micro-foundations of routines are missing.

Microfoundations organizational routinesand capabilities: a course-correction

While there has been historical drift in the concept oforganizational routines and capabilities over time, we nexthighlight how future work might course-correct this drift andaddress the concerns that we have outlined related to micro-foundations. We specifically highlight three promising areasfor future work: (1) the origins of routines, (2) intentionalityand exceptions, and (3) aggregation and emergence.

The origins of routines

A fundamental problem with extant work on organizationalroutines and related/derived concepts is the lack of clear(causal) understanding of the origin of routines. Recently,Winter has explicitly noted that ‘‘. . . the question of whereroutines and capabilities come from . . . deserves vastly moreattention’’ (Winter in Murmann et al., 2003, p. 29). Zollo andWinter further add: ‘‘To our knowledge at least, the litera-ture does not contain any attempt at a straightforwardanswer to the question of how routines — much less dynamiccapabilities — are generated and evolve’’ (2002, p. 341). Iforganizational routines and capabilities indeed are the fun-damentally heterogeneous component driving organizationalperformance (cf. Eisenhardt & Martin, 2000), the question oftheir origin seems absolutely fundamental. While observedcollective heterogeneity may be a function of randomnessand luck (Alchian, 1950; Denrell, 2004), nonetheless strate-gic management, after all, should also be concerned withpurposeful heterogeneity (Barney, 1991), that is, withexplaining heterogeneous expectations and choices thatmay lead to collective performance differences. If strategyindeed is purposeful, then scholar should not just highlightthe inevitabilities of environmental pressures and overallrandomness (cf. de Rond & Thietart, in press), as routines-based work at times does, but strategy should also havesomething to say about the underlying expectations andchoices that firms make (cf. Barney, 1986).

However, if a routine is defined as ‘‘pattern of behaviorthat is followed repeatedly, but is subject to change ifconditions change’’ (1964, p. 263), and performance differ-ences indeed are imputed to this routine, then a natural (andcritical) question is where this (potentially successful) ‘‘pat-terned behavior’’ comes from in the first place. Thus, theexistence of the routine (nor the existence of any othercollective constructs) should not be taken for granted.And, while the explanatory onus may be placed, and indeedoften is placed, on environmental conditions rather thanchoices, nonetheless it seems that a more purposeful andindividual-level focus is warranted. Granted, most all defini-tions of routines continue to highlight the inevitabilities orthe determinacy of selective, environmental pressures; theenvironment clearly plays a key role in shaping behavior.However, again, the focus on the collective and the unin-tentional and the automatic seems to be a quite radicaldeparture from the raison d’etre of strategic management,which ought to impute actions to expectations and beliefsand choices rather than inevitabilities, and which ought toprovide at least some actionable and useful theoreticalinsights for the practicing manager (Rumelt, Schendel, &

164 T. Felin, N.J. Foss

Teece, 1991). In all, the present capabilities-based workrelies heavily on the importance of the environment androutine in determining overall collective outcomes, but theseenvironments largely equally influence all firms and thus thesources of heterogeneity must logically originate from nestedlevels.

There is significant potential, then, to understand theunderlying choices that lead to routine action in the firstplace, rather than simply citing experience or other pastbehaviors. While scholars argue that ‘‘firms tend to do whatthey have done before’’ (Kogut & Zander, 1995, p. 425), thistype of explanation unfortunately only confounds the pro-blem of explanation and creates an infinite regress thatcannot meaningfully address the origins of routines andorganizational behavior. Experiential models of organiza-tional capabilities (Dierickx & Cool, 1989; Eisenhardt &Martin, 2000) also replicate this infinite regress problemas they amount to the post hoc stalking of experiences thatlater (happen to) prove fruitful, though the ex ante speci-fication of how organizations decide what to do in the firstplace does not get addressed. In other words, rather thanhighlight previous experience, or higher level routines, asthe origin, more careful work is needed on the nestedantecedents. Furthermore, if routines themselves lack aclear definition (cf. Becker, 2004, p. 644), then citing priorroutines as the origin of future routines amounts to definingsomething undefined in terms of something else that ispoorly defined. . . one enigma is used to explain another.

Some have argued that routines originate from random,quasi-random, or path-dependent search related to pastproblems and associated solutions (Cohen, March, & Olsen,1972; also see Becker, 2004, p. 652)15 or, more simply, pasthistory (Levitt & March, 1988). That is, when faced with aproblem, organizations tend to rather myopically search forpotential solutions in the immediate neighborhood (or ‘‘land-scape’’) of what has worked for them in the past (cf. Cyert &March, 1963). While this type of path-dependence obviouslycharacterizes the firm, the very concept of path-dependencerequires being explicit about where the path originatesfrom. We believe that early work by March and Simon(1958), and Barnard (1938) implicitly began their analysiswith these implications in mind; that is, with a clear under-standing of the need to focus on the choice-related origins oforganizational phenomenon, a focus on how individuals deci-sions and interaction aggregate (March, 1962; Simon, 1964).By way of example, Simon notes, with regard to the origins ofroutines, that the ‘‘. . . establishment of such rules androutines is itself a rational decision, and when we speak ofrationality in organizational decision-making, we mustinclude them and the process for establishing them’’ (Simon,1945/1997, p. 89), thus clearly highlighting some of theconcerns that we have outlined here.

15 Thus, an alternative origin of routines hypothesized in the lit-erature, if we conceive of routines as solutions to problems, aregarbage can-like models (Cohen et al., 1972). In short, routinesoriginate from studying past problem-solution situations and findingsolutions which are proximate to new problems–—a model that canalmost be construed as random. This conceptualization still takes theexistent of the routine for granted, and thus we build on alternativefoundations.

Intentionality and exceptions

To conceptually tease out the problem of an infinite regresshighlighted above (routines leading to routines or capabil-ities), and to theoretically anchor on an origin for routines, itis best to consider the initial conditions of activities whichsubsequently become routine. That is, any meaningful orga-nizational activity, at least activity which might be a sourceof intentional heterogeneity, inherently begins with somekind of expectation, belief and associated choice. Managersand organizations make fateful decisions or choices relatedto paths that they might pursue or activities which may laterbecome routinized. Recognizing the origin of routines inthese types of decisions importantly moves analysis towardunderstanding concepts that might lie outside of the conceptof the routine itself, rather than tautologically imputingcausation to previous routines (as is done in the capabilitiesliterature). In short, our argument is that organizationalactivities originate from intentions and expectations andthe associated decisions and choices in effect provide the‘‘content’’ of routines. A central construct for future work,then, might be ‘‘intentionality.’’ That is, individuals withinorganizations have intentions, beliefs, interests and expec-tations that drive their behavior in collective settings.

Now, while intentionality itself might also be wrapped upinto the routine, nonetheless the notion of having to manage‘‘exceptions’’ provides an opportune window to tease out theintentional versus behavioral aspects of decision-making andchoice and behavior. The managerial implications of thisindeed are interesting. As noted by Alfred Sloan in 1924(from Krass, 1997, pp. 176—177; also see Garicano, 2000,p. 898):

Of all business activities, 99% are routine. They do notrequire management attention except in the aggregate.Only the one exception in a hundred cases need come to amanager’s attention. The entire 100% can be handled bymanaging the 1% of exceptions. . . We do not do muchroutine work with details.

A key insight indeed is that much of what really matters(note: not necessarily much of what happens) in organiza-tions has to do with exceptions (also see Barnard, 1938, p.240), rather than routines, and these exceptions requireintentional deliberation and rationality about what the orga-nization might do (cf. Simon, 1964). Specifically, while we donot doubt that a large part of organizational activity might beroutine (routines obviously help to economize on cognitivecosts and help in reducing uncertainty, cf. Becker, 2004, pp.656—657), how exceptions are dealt with proves more impor-tant in explaining performance outcomes andmight provide awindow into understanding where routines and capabilitiescome from first place. After all, if routines and competenciesare present within populations of organizations, then theyprovide no meaningful advantage for an organization (Mur-mann et al., 2003), and thus differentiation occurs in themanagement of exceptions.

Naturally, once an organization’s response to exceptionshas been decided, over time these exceptions may becomepart of the routinized behavior of the organization. Routines,then, may naturally have their origins in decisions and cog-nitive work related to ‘‘exceptions’’ such as new situationsand problems. Routines, then, rather than being anchored on

Organizational routines and capabilities: Historical drift and a course-correction toward microfoundations 165

past routines, have their origins with thought and choicerelated to how individuals and organizations deal with envir-onmental problems (cf. Nickerson & Zenger, 2004). And, howorganizations deal with exceptions, new situations, and pro-blems of course may, and often does, importantly shapeorganizational heterogeneity and differential performanceoutcomes.

Overall, organizational scholars need to pry more deeplyand meaningfully into why organizations respond in particu-lar ways, rather than simply noting the relationship betweenenvironmental stimuli and associated individual and organi-zational responses in the form of fairly automatic and incog-nizant routines. In short, the contextual emphasis of extantwork (and definitions) tends to imply that the external is thesource of routines (and their derivations such as capabilities),but we believe that more meaningful progress can be madeby considering individual-level and choice-related matters assource of origin. This type of ‘‘micro’’ explanation providesmore robust theoretical solutions (Coleman, 1990).

One of the implications of the above discussion is thatinfusing an increased measure of rationality into extanttheorizing on routines will result in better and more robustexplanation. In line with the historical drift that we havenoted with regard to moving from observed to unobservedphenomenon, and from individual to collective, drift has alsoincurred in how much rationality scholars ascribe to indivi-duals such as managers. That is, since Simon’s introduction of‘‘bounded rationality,’’ there appears to have been increas-ingly more emphasis on boundedness rather than rationality(e.g., Levitt & March, 1988). A natural outgrowth of thestrong focus on boundedness has been that individuals andtheir intentionality have tended to fall out of theoreticalmodels, as individual efforts are bounded by broader collec-tives routines, scripts, conventions and programs (cf. Biggart& Beamish, 2003). The explanatory burden has been increas-ingly placed on the environment rather than on actors such asindividuals and organizations. An effort to bring back indivi-duals in the explanans of management theories would there-fore naturally seem to involve an effort to increase therationality-to-boundedness quotient in management the-ories; to be sure, not to the extent of introducing the tenuousassumption of omniscience or perfect knowledge, but anincrease in the rationality-to-boundedness quotient none-theless is warranted.

Aggregation and emergence

As suggested above, the behavioralists (March and Simon inparticular) were clearly aware of the thorny issues involved ingoing from the individual to the organizational (or collective)level; their theoretical effort, in some ways, can be seen as atheory about individual decision-making and how it aggregateswithin the organization (e.g., see March, 1962; Simon, 1964).Perhaps because their concernwas not decision-makingwithinorganizations, but firm-level behavior, Nelson and Wintersidestepped this aggregation problem of moving from indivi-dual decisions and actions to organizational outcomes byreasoning metaphorically from individual skills to organiza-tional routines. Skills, again, as developed by Nelson andWinter, are individual-level capabilities ‘‘for a smoothsequence of coordinated behavior’’ (1982, p. 73). Outcomestherefore are a function of individual skills and abilities, which

indeed can be fairly automatic. However, this should not hidethe fact that significant heterogeneity in skills andabilities andinterests may already exist at the individual level. While theconceptual and metaphorical leap from individual skills toorganizational routine has by now been readily accepted byscholars in the domains of evolutionary economics and stra-tegic management, there is a need to carefully revisit this linkand to address the aggregation problem.

What gets missed with the leap from individuals to orga-nizational behavior is that it is individuals, rather thanorganizations, that act and behave (cf. Hedstrom & Swed-berg, 1998). Or, as more generally put by Chester Barnard:‘‘The individual is always the basic strategic factor of orga-nization’’ (1938, p. 139). In other words, ‘‘organizational’’action, behavior, and outcomes are really proxies for inter-acting individuals who take action, behave, and create theoverall, emergent outcomes. While there is general aware-ness of Simon’s (1964) warning to not reify organizations, orput differently, to attribute individual-level qualities orcharacteristics to organizations, nevertheless there has beena steady increase in organization-level constructs — organi-zational identity, organizational learning, organizationalmemory — that has not been accompanied by carefullyestablishing the theoretical linkages between the individualand the organizational levels (Coleman, 1990; cf. Whetten,Felin, & King, in press). For all organization-level constructs,the question of how ‘‘the individual exactly fits in’’ deservescareful consideration. After all, organizations are populatedby individuals with various predispositions, experiences,characteristics, talents, abilities, preferences, expectations,etc. and the interactional patterns and collective outcomesof these individuals needs to be addressed rather than‘‘black-boxed.’’ Thus, even if we presume the existence(and we are not necessarily denying their existence) ofphenomena such as routines and capabilities, a readily appar-ent question is the origins of these collective constructs(Coleman, 1990, pp. 2—5).

A key, first question then has to do with aggregation: howdo we aggregate individual interests, perceptions, goals,expectations and so forth in organizations? What is requiredon this front is a careful specification of who the individualsare that compose the organization (Felin & Foss, 2005); whatare their goals, intentions, beliefs and so forth? If the exis-tence of the collective is already taken for granted, and itsgoals and direction already given–—then little is left for theorganizational scholar to explain. As, for example, put byMises, ‘‘the way to a cognition of collective wholes is throughthe analysis of individual actions’’ (1949, p. 42). Further-more, central to this analysis is the recognition that indivi-dual goals and cognitions are not only complimentary(aggregation of course is easy if everyone agrees) but indi-viduals also have conflicting preferences; in other words, ‘‘ina multiperson situation, one man’s goals may be anotherman’s constraints’’ (Simon, 1964, p. 8), and naturally politicsand hierarchy may also play a role in emergent outcomes(March, 1962). Research on organizational routines, might,for example, benefit from replicating the type of methodo-logical rigor and care with which some scholars have articu-lated the aggregation and emergence of collective intentionsor norms (e.g., Gilbert, 1989; Ullmann-Margalit, 1977).

Naturally, the aggregation of individual-level factors is notalways straightforward given that the part—whole relationship

166 T. Felin, N.J. Foss

between individuals and organizations is not always strictlyadditive in nature. That is, as individuals interact in organiza-tions, various, emergent, collective factorsmay result, factorsthat cannot meaningfully be reduced to individuals. This doesnot obviate the need to carefully specify the micro-elementsthat compose the organization. However, when trying tounderstand ‘‘emergence,’’ a particular premium is placedon understanding the interaction of individuals. Schelling’ssegregation model is a brilliant example of this type of work;work that specifies how individual interaction leads to surpris-ing, emergent, collective outcomes. In fact, a rapidly growingliterature on ‘‘agent-based’’ modeling shows promise in deli-vering careful specifications of themicrofoundations that leadto macro-outcomes. Specifically, the approach, along withassociatedmathematical and rational choicemodels, requiresscholars to carefully specify the micro-conditions and inter-actions that lead to particular macro-outcomes (such as orga-nizational routines or capabilities). Thus, rather than takecollective constructs for granted, via modeling the collectivein essence ‘‘grown’’ in emergent fashion. Thus, as argued byEpstein, ‘‘if you did not grow it, you did not explain it’’ (2007,p. 8). In all, the current intuition around routines jumpsdirectly to the collective level, but there is much opportunityto carefully specify, model and illustrate how routines aggre-gate and emerge from microfoundations and individual inter-action.

Conclusion

In this paper we have offered an historical analysis of thenotion of organizational routines and capabilities, and dis-cussed the need for microfoundations. Overall we argue thatfuture research should focus on key issues related to theorigins of routines, intentionality and key matters related toaggregation. Thus, key questions that deserve considerationinclude: Where do routines originate from? What is theindividual-routine link? What role do exceptions and inten-tionality play in the potential emergence of routines? How dodecisions aggregate in organizations? At present, the focus oncollective-level constructs such as organization routines orcapabilities has led to tautological statements that surpassand surpress key individual-level factors that need to becarefully understood. Our argument has been that theresearch on organizational routines and capabilities shouldpay careful attention to the underlying micro-dynamics oforganizational activity: individual decision-making, indivi-dual interaction, aggregation and how these micro-dynamicsthenmight lead to subsequent collective outcomes related tostructure and performance.

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