The Evolving Firm: How Dynamic and Operating Capabilities Interact to Enable Entrepreneurship

Abstract

In this study, we expand our understanding of firm evolution by focusing on how operating and dynamic capabilities interact through endogenously led changes. The focus on endogenous change complements the current emphasis in the literature on how dynamic capabilities help firms cope with the risk of core rigidities following an exogenous shock. Our comparison of two collaborating firms shows that, at the operating capability level, firms build absorptive capacity in value networks during their product development experiences and this learning needs to be captured at the product portfolio planning level. When this learning is captured and transformed, product portfolio planning acts as a dynamic capability reconfiguring operating capabilities based on beliefs about follow-on entrepreneurial opportunities. Under conditions of endogenous change, dynamic capabilities are guided by a proactive entrepreneurial logic, complementing the need for reactive adaptive responses in circumstances of exogenous change. A key implication is that dynamic capabilities have a more expansive and critical role in the adaptation of firms than previously considered. Our theorizing shows how interactions between dynamic and operating capabilities build the adaptive capacity of the organization.

The Effects of Exogenous Shocks on the Development of Regional Innovation Systems

“…Previous studies have suggested that exogenous shocks can induce substantial change (Newey and Zahra, 2009;Vergne and Durand, 2010;Li and Tallman, 2011;Paruchuri and Ingram, 2012). The empirical findings in this study support existing knowledge by illustrating that such external pressures indeed represent powerful agents of change that positively affect path dependency.…”

The use of organizational capabilities to increase customer value

“…After a review of some of the numerous definitions of DC (Barreto, 2010;Eisenhardt & Martin, 2000;Newey & Zahra, 2009;Teece et al, 1997;Wang & Ahmed, 2007;Winter, 2003;Zott, 2003;among others), the definition of DC in this paper is "the firm's capacity to reconfigure its operational capabilities".…”

“…The authors attempt to identify possible combinations of the three organizational capabilities and propose and analyze a sequence for creating superior customer value (Barreto, 2010;Eisenhardt & Martin, 2000;Newey & Zahra, 2009;Teece, Pisano, & Shuen, 1997;Wang & Ahmed, 2007;Zahra, Sapienza, & Davidsson, 2006;Zott, 2003).…”

The quest for process operations variability reduction in manufacturing firms in South Africa

“…A number of operations management researchers claim that, while competitive capabilities at the manufacturing firm level are defined as cost, quality, delivery reliability, and speed of delivery, operations-level capabilities should refer to routines (Ghosh, 2001;Schroeder et al, 2002). Capabilities building is linked mainly to the influence on organisational routines at the individual, organisational and network levels, which include customer/supplier integration and competitors (Capaldo, 2007;Newey & Zahra, 2009;Lisboa, Skarmeas & Lages, 2011;Capaldo & Messeni, 2011). Stephen et al (2015) point out that process management consists of three dimensions, which are process control, incremental process improvement and radical process improvement.…”