Toward an action-based view of dynamic capabilities for international business

Abstract

A growing body of research highlights the importance and development of dynamic capabilities as well as the contingencies that can affect such development. However, existing research pays limited attention to the demands of competition in today's dynamic, volatile, and ambiguous international markets. The international business (IB) realities and contexts require companies to develop and effectively deploy dynamic capabilities to achieve evolutionary fitness, adapt, and successfully exploit opportunities (and neutralize threats) stemming from technological, social, geopolitical, institutional, and economic changes and interdependencies among various layers of embeddedness. Consequently, in this article, we discuss dynamic capabilities that tailor to the specifics of IB contexts, underscore their conceptual properties relevant for the IB realities, and articulate the processes involved in their building and leveraging by established and young MNEs. We further clarify the entrepreneurial foundations and actions essential for development and effective deployment of dynamic capabilities for IB. Finally, we offer our suggestions on how future IB research should explore these issues so as to make dynamic capabilities thinking actionable.

COVID-19 uncertainties, dynamic capabilities and the strategic response of multinational enterprises

“…These three DC components have been described as higher-level capabilities which allow MNEs to respond quickly to changing environments (Petricevic and Teece, 2019;Teece, 2020). Ultimately, this enables firms to get the opportunity to maintain evolutionary fitness and resilience concerning the external business environment (Teece, 2014a(Teece, , 2014b(Teece, , 2018Zahra et al, 2022). Thus, when exogenous shocks such as the COVID-19 pandemic occur and create unprecedented disruptions and unanticipated uncertainties for MNEs' efficient business operations, they need to respond by sensing opportunities and threats associated with the pandemic, eventually seeking continuous internal improvement and organizational transformation.…”

“…A strategic response from an organization was deemed complete if it had all three integral components. All three attributes enable firms to maintain evolutionary fitness and resilience concerning the external business environment (Teece, 2014a(Teece, , 2020Zahra et al, 2022). Incomplete components or attributes without matches were not considered for further analysis.…”

“…Furthermore, Amankwah‐Amoah (2016) found that organizations exposed to the Ebola outbreak became more resilient after passing through three phases of environmental scanning, retrenchment strategy and recovery. Apart from organizational resilience (Amankwah‐Amoah, 2016), firms can also use DCs when confronted with uncertainties from exogenous shocks (Zahra et al , 2022).…”

“…Arguments have been made that dynamic capabilities (DCs) could help organizations manage uncertainties better (Dagnino et al , 2021; Zahra et al , 2022). Additionally, it has been suggested that organizations could remain competitive during and after extreme events by using DCs to overcome such crises (Fainshmidt et al , 2017; Wilhelm et al , 2015).…”

What merits greater scholarly attention in international business?

“…However, if studies have defined an audience, and address a topic important to that audience, we should also be able to describe proposed actions. In their editorial on action-based dynamic capabilities for IB, Zahra, Petricevic, and Luo (2022) suggest that attention to underlying processes and mechanisms is one approach to make research actionable. Further, it would be helpful to describe the circumstances under which the proposed actions apply.…”