Within the capabilities-based view of the firm, there is debate about the relative importance of ordinary and dynamic capabilities for firm performance and about the extent to which their performance effects are contingent on environmental conditions. We meta-analyze 115 studies to investigate the relationship between both ordinary and dynamic capabilities and the financial performance of firms in relatively stable versus changing environments. The results suggest that the performance effects of both types of capabilities are positive and similar in magnitude. Environmental dynamism reinforces the effects of both ordinary and dynamic capabilities. Furthermore, the two types of capabilities are closely associated. Our findings provide support for a moderate capabilities-based view of the firm, rather than one that considers dynamic capabilities as superior to ordinary ones. Additional supporting information may be found in the online version of this article:Appendix S1. Papers by journal. Appendix S2. Papers by author(s). Appendix S3. Capability coding. Appendix S4. Environmental conditions and capabilities. Appendix S5. Firm performance categorization. Appendix S6. HOMA Procedure. Appendix S7. Results of MASEM -Harmonic means. Appendix S8. Results of HOMA -Pearson correlation coefficients; complete set of measurements. Appendix S9. Results of HOMA -Cross-sectional and panel data; Pearson correlation coefficients.
Emerging markets offer a wide range of opportunities for firms from developed markets, especially in terms of high growth potential. However, business models that enable firms to achieve competitive advantage in their home markets are often challenged by the different nature of emerging markets. Firms, therefore, have to innovate and adapt their business models to better fit the specific context of these international markets. Based on a longitudinal case study of a German luxury automobile manufacturer's internationalization to India, we develop a phase model of the business model adaptation process to emerging markets. We find that firms adapt their business models in four phases: international extension, local emergence, local expansion, and local consolidation. Firms step‐wise adjust business model components along this process to develop a local emerging market business model. In each phase of the business model adaptation process, firms emphasize different components of the business model, before they enter into continuous adjustments of all business model components. Furthermore, we find that firms overall adjust some components of their business model more significantly than others. Our findings are of particular relevance to the literature on business model internationalization and the literature that points out the evolutionary, step‐wise nature of business model innovation.
We study the relationship between diversification and firm performance in the context of the decline in levels of diversification over time. We argue that the pressure to reduce diversification may have more strongly affected those firms whose diversification strategies were most detrimental to firm performance. We employ meta‐analytical regression (MARA) in order to test our hypotheses, using a total of 267 primary studies containing 387 effect sizes based on 150,000 firm‐level observations from over 60 years of research on the diversification–firm performance relationship. The findings suggest that levels of unrelated diversification have decreased, whereas levels of related diversification have increased since the mid‐1990s, following an initial decrease in the 1970s and 1980s. Furthermore, we find that the relationship between unrelated diversification and firm performance has improved significantly over time, whereas the relationship between related diversification and performance has remained relatively stable.
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Home country institutions, for instance chambers of commerce and educational systems, can support firms' efforts to expand into foreign markets. However, only some firms utilize this support and become successful in international markets. We propose that these firms have a particular ability to leverage institutions; they have institutional leverage capability. More precisely, we explain that firms need to be aware of the institutional support, access it, decide to adopt it, and adapt their resources to fully exploit the institutions available in their home countries. We recommend that firms design organizational structures and processes to leverage institutions for internationalization. We illustrate our suggestions with the example of the German ‘hidden champions,’ medium-sized firms that are global market leaders, and how they leverage institutions to internationalize.
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We develop the notion of a firm's institutional leverage capability in order to explain heterogeneity among firms with respect to their ability to turn a location's generally available institutional benefits into firm-specific institutional competitive advantages. Institutional leverage capability represents a higher-order construct formed by the four components of awareness, access, adoption and adaption of institutional benefits. It is of particular strategic relevance in institutional contexts that provide high levels of support to firms. Firms can use institutional competitive advantages, which they generate by leveraging their home country's institutions, for the purpose of internationalization. We illustrate our argument using the example of several mid-sized German companies that have leveraged home-country institutional benefits and attained leading positions in international markets. Copyright © 2016 Strategic Management Society
The paper is aimed at investigating the capabilities of social entrepreneurship (SE) firms and how they achieve competitive advantage while engaging in social value creation. We employ a business model perspective to understand the (self-) sustaining mechanism for social good. We carry out an in-depth investigation of three social entrepreneurship (SE) ventures. We analyze the history of these ventures to determine how they achieved competitive advantage. The cases are analysed based on the internal development in the context of environmental support. We find that SE ventures, like all other organizations, achieve competitive advantage based on available resources such as reputation and network of the founder, managerial experience and other corporate resources within the firm. We also find that the competitive advantage often comes from innovate usagea practice that is reinforced by the support from institutional environment. Based on our analysis, we conclude that distinct capabilities of social businesses help them achieve competitive advantage, and that policy makers should institutionally support these ventures. Our application of a business model perspective in social entrepreneurship is unique, and advances the understanding of social businesses from a strategic management perspective.
In a Schumpeterian economic model, dynamic capabilities (DC) help entrepreneurial firms create competitive advantages. However, advancing the construct of DC in entrepreneurship is hampered by the incompatibility of some key assumptions in entrepreneurial ventures. In this paper, we propose that dynamic managerial capabilities (DMC), which builds upon the DC perspective by drawing attention to the role of managers, is a better alternative in analyzing entrepreneurship research. We find support for our ideas in a systematic analysis of extant research. Our review highlights the evolution of DMC literature in entrepreneurship and traces its dominant intellectual structures. In concurrent analysis, we highlight the limitations of utilizing DC. Additionally, we shed new light on the emergence of organizational capabilities, and present new avenues for future research.
In this paper, we investigate the evolution of multinational corporation (MNC) research and development (R&D) subsidiaries through evolution of innovation networks. Their evolution within and outside MNC R&D subsidiaries has not been investigated in the context of MNCs that source innovation from emerging economies. We do so, using two dimensions: geographical and organizational boundaries. In order to identify a pattern, we chose the information technology (IT) cluster in Bangalore, India, as the context for a qualitative study; for there are MNC subsidiaries that operate and innovate within and outside organizational boundaries, and have strong links with firms within and outside of Bangalore cluster. The globalized nature of the cluster helps us infer the evolution of innovation networks by taking a knowledge flow perspective. We identify four distinct phases based on where and how knowledge flows. We find that the innovation networks of these MNC subsidiaries in emerging economies first develop as hierarchical networks and then extend to the local markets. Within the first part, the networks start with a non‐local nature (phase A) and get embedded into local networks (phase B and phase C), finally developing into non‐local (phase D) market ties that enable MNC headquarters to source innovation from the host country. In an emerging economy context, clusters can serve as a springboard by providing a local environment that can help overcome institutional voids.
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