Relevance of organizational capabilities and its dynamics: what to learn from entrants' product portfolios about the determinants of entry timing

Abstract

The resource-based view of the firm suggests that the timing of market entry by a firm depends on its resources and capabilities, but several important questions remain. First, in a high-velocity market where capabilities change quickly, how does entry timing depend on the capabilities at varying points in time? Second, how much flexibility does a firm have in altering its capabilities to achieve desirable entry timing? To answer these questions, this study sets out to develop a dynamic, refined version of the resource-based view that parameterizes a firm by its time-varying capability relevance with respect to a focal market, and makes predictions on entry timing and future growth of capability relevance. The study develops a novel approach that uses the entrants' product portfolios to infer a potential entrant's capability relevance. The results based on a panel of potential entrants show that the initial and current capability relevance each affect entry timing alone, revealing the persistent effect of the initial condition. However, given the knowledge of the current capability relevance, the initial relevance has no effect on entry timing, suggesting that the initial relevance affects entry timing through its influence on the current relevance. Firms that are in an initially unfavorable position can still achieve early entry, provided that they improve their capability relevance over time. ). The theory suggests that the resources and capabilities of a firm can be a source of sustainable competitive advantage, as opposed to the attributes of an industry or the position occupied by the firm in the industry, as Porter (1980) argues. Many scholars who study the determinants and effects of entry timing (or order of entry) have applied the resource-based view either implicitly or explicitly (

Top Management’s Attention to Discontinuous Technological Change: Corporate Venture Capital as an Alert Mechanism

“…However, some researchers have recently underscored the importance of network composition in explaining the different effects of networks to which a focal firm is connected (Lee 2008). Our finding that heterophilous ties through coinvestments with high-status VCs have a consistently significant positive effect on timely attention by top management, whereas homophilous interorganizational ties through alliances to industry peers have no such univocal effect, further emphasizes the importance of network composition.…”

“…There is a long-standing debate on which network structures provide the most benefits to firms (Burt 1992, Coleman 1988, Lee 2007), but researchers have only recently begun to explore the importance of network composition in explaining a firm's gains as a result of the multitude of networks to which it is connected (Lee 2008). We contribute to this literature by distinguishing between relationships with homophilous and heterophilous partners and by showing the differing effects of these relationships on top management's attention.…”

Beyond fusion towards IoT by way of open innovation: an investigation based on the Japanese machine tool industry 1975-2015

“…And this conceptualization was identified as a unique Japanese capability to innovate (Kodama, 1992a). Indeed, the innovation pattern was shifting from technical breakthrough to technology fusion, and the management implications of this shift were also discussed (Kodama, 1992b, Lee, G., 2008, Lee, K., 2017. It was argued that the difference between success and failure is not how much a company spends on research and development but how it defines it.…”

Acquisition vs. internal development as modes of market entry

“…Following Lee's (2008) work on capability relevance, we measure relatedness by projecting a firm's overall resources and capabilities in the direction of those that are relevant with respect to a specific market. Our relatedness measures are based on the rate of joint occurrence of products within firms' portfolios in our sample.…”

“…Our relatedness measures are based on the rate of joint occurrence of products within firms' portfolios in our sample. This approach, similar to Teece et al (1994), Bryce and Winter (2009), and Lee (2007Lee ( , 2008Lee ( , 2009, offers attractive features for strategic management research but has rarely been applied. We innovate upon this approach by capturing the dynamics of relatedness along three dimensions.…”