Lecture 7 - Dynamic capabilities & innovation Flashcards
RBV
Resource based view
RBC view of a firm
Influential theoretical framework for understand how competitive advantage within firms is achieved and how that advantaged might be sustained over time
RBV focuses on the
internal organisations of firms
RBV assumes (3)
1) firms can be conceptualised as bundles of resources
2) those resources are heterogeneously distributed across firms
3) resource differences persist over time
In dynamic/high velocity markets, dynamic capabilities are
the source of sustained competitive advantage
What is key in high velocity/dynamic markets?
Manipulation of knowledge
Why has RBV been criticised?
1) Conceptually vague
2) Tautological
3) Lack of empirical grounding
4) Sustained competitive advantage has been seen as unlikely in dynamic markets
Dynamic capabilities are ____ in firms
processes embedded
The Eisenhardt and Martin (2000) paper found 4 key aspects of the nature of dynamic capabilities
1) Dynamic capabilities consist of specific strategic and organisational processes like product development, alliancing, and strategic decision making that create value for firms within dynamic markets by manipulating resources into new value-creating strategies
2) Dynamic capabilities exhibit commonalities across effective firms (best practice) - therefore they have greater equifinality, homogeneity, and substitutability across firms than traditional RBV thinking implies
3) Effective patterns of dynamic capabilities vary with market dynamism. When markets are moderately dynamic such that change occurs in the context of stable industry structure, dynamic capabilities resemble the traditional conception of routines (complicated, detailed, analytic processes that rely extensively on existing knowledge and linear execution to produce predictable outcomes). In contrast, high velocity markets (industry structure blurring) dynamic capabilities = simple, experiential, unstable processes that rely on quickly created new knowledge and iterative execution to produce adaptive, but unpredictable outcomes.
4) Well known learning mechanisms guide the evolution of dynamic capabilities and underlie path dependence
Resources
Specific physical, human, and organisational assets that can be used to implement value-creating strategies
Capabilities
Combination of resources and process
Together, underpin competitive advantage for a firm in a product/service market
Allow firms to more efficiently and effectively choose and implement activities necessary to produce/deliver a product/service
Tuchman and Anderson Model of technological innovation
Technologies evolve through periods of incremental change (e.g. technological breakthroughs) that enhance or destroy competences of established companies
Competence-destroying discontinuities = initiated by new entrants
Competence-enhancing discontinuities = initiated by existing firms
Disruptive innovation (Christensen, 1997)
Incumbents fail because they spend to much time listening to and meeting needs of existing mainstream customers who, initially, have no use for products from the disruptive technology
Define invention
Creation of novel ideas that demand allocation of resources to become an ‘innovation’
Define innovation
Process by which inventions are transformed into products/services that add value to customers and society
