A real options approach to managing resources and capabilities

Abstract

The resource-based view (RBV) and the dynamic-capabilities approach (DCA) have emerged as two important frameworks in strategic management that seek to explain why firms are different. In recent years operations management scholars have sought to integrate both RBV and DCA within the field's epistemological orientation to provide normative frameworks for practising managers. This paper argues that the structure of resources and capabilities are such that they present impediments to normative prescriptions. Using ideas from complex systems it argues that any framework for thinking about resource accumulation and capability development must take account of uncertainty and knowledge imperfections in the system. The paper contends that the real options framework is an appropriate heuristic for managing the process of capability development and a case study of a manufacturing operation is used to illustrate our ideas. Introduction and overviewThe resource-based view (RBV) and the dynamic-capabilities approach (DCA) constitute two separate yet highly related streams of research in the strategic-management literature. A fundamental question in the field of strategic management is how do firms create and sustain a competitive advantage (Rumelt et al., 1991). The resource-based view and the dynamic-capability-based approach have addressed this question in different ways. According to the RBV, competitive advantage and durable performance differences between firms are accounted for by asymmetric resource endowments with differential productivities (Wernerfelt

Competitive strategies and firm performance: Technological capabilities' moderating roles

“…A capability is a lower-order functional, operational or technical capacity that may be further subdivided into specific (individual) skills or specialized capabilities. Capabilities constitute individual skills, tacit forms of knowledge and social relations that are embedded in a firm's routines, managerial processes, forms of communication and culture (Pandza et al, 2003).…”

4th party logistics service providers and industrial cluster competitiveness

“…4PL is therefore contributing on using the existing operations resources of the cluster and firms and can deal with change and reshaping these resources in order to deal with changes in the external firm context (Wu et al, 2010). Such a view is based on the dynamic capabilities (Teece et al, 1997) that builds on RBV, in that firms and in our case, clusters, develop capabilities to respond to the changes in their environment (Pandza et al, 2003a) and therefore this responsiveness and reconfiguration can lead to competitiveness. This integration (and collaborative synergy) is shown in Figure 4: the development and reconfiguration of the industry chain depends on the firm and the support by derivative industries.…”

Modeling Asset Interconnectedness on Investment Models

“…Time compression and asset mass efficiencies have been considered on lumpy investment models (Cooper and Haltiwanger 2006;Doms and Dunne 1998;Barnett and Sakellaris 1998). Causal ambiguity on real options theory (Pandza et al 2004;Sirmon et al 2007) and asset erosion has always been present through the depreciation factor that affects asset in place value (Lewellen and Bradinath 1997).…”