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Dynamic Capabilities:

What are They?


Eisenhardt, K. & Martin, Jeffrey A.

Strategic Management Journal (2000)

Alfiyatul Qomariyah

RBV: how competitive adv. within firms is achieved and how that adv.
might be sustained overtime
RBV: bundles of resources that are VRIN
However
- RBV didnt explain how and why firm have competitive adv. in
dynamic market
- RBV was still doubt about conceptually vague and tautological
- RBV was lack of empirical grounding
- SCA didnt exist in dynamic markets

Then
Dynamic capabilities: integrate, build, reconfigure internal and external
competencies to address rapidly changing environment become the resource
of SCA
Therefore
The purpose of this study: to extend the understanding of dynamic
capabilities and in so doing enhance RBV
Noted: dynamic capabilities are necessary, but not sufficient, conditions for
competitive adv.

Dynamic Capabilities
are the antecedent organizational and strategies routines by which
manager manage their resource base to generate new value-creating
strategies
Dynamic capabilities as identifiable, specific process
- DC integrate resources
- DC focus on reconfiguration of resources within firm
- DC are related to the gain and release of resources, knowledge creation
routines for effective strategy and performance (by alliance and acquisition
routines)
- DC as specific processes often have extensive empirical research bases and
management applicability

Commonalities in key features, idiosyncrasy in detail


- Commonalities: use common features that are associated with
effective process across firm
- Idiosyncrasy: DC are characterized as unique and idiosyncratic process
that emerge from path dependent histories of individual firm
- Product development process will be effective for superior
products that address a unique aspect of product quality or related
production
- Performance is measured in terms of the speed and flexibility of
development (functional temas)

- Effective product development process involves routines to ensure


that concrete and joint experiences among team members to fix
specific problem and enhance innovation.
- Effective product development process extensive external
communication, by project team leader to defense from outside
influences and gain resources
- Commonalities is related to more effective routines in DC because
preacquisition and post acquisition routines lead to successful
acquisition process
- However, common features dont mean that all of the DC are the
same across the firm

- Implication of commonalities in effective DC:


1. Imply equifinality (multiple paths)
managers may begin the development from different starting point and
uniqueness, but end up with similar capabilities in terms of key attributes
2. Imply the routines are more sustainable and fungible across different
context
3. Imply that DC are not likely to be source of SCA (VRIN)
DC are V and R, but I is not relevant and N is not exactly N
4. Suggest that the scale of idiosyncratic firm effect in the empirical
literature is probably overstated

Market dynamics: moderately dynamic to high-velocity market


- Moderately dynamic: market change occur frequently, predictable, linier
paths, boundaries are clear, and players are well-known
Effective for developing new manufacturing process when the routines
involve a structured and analytical process
- High velocity: market change become nonlinier, less predictable,
boundaries are blurred, successful business model are unclear, market
players are ambiguous and shifting uncertainty
Effective DC are simple because it will make managers focus on broadly
important issues
DC highly involve the creation of new, situation specific knowledge.

DC use prototyping and early testing, real-time information, cross


functional relationship, and intensive communication
DC consist of simple rules and real-time knowledge creation with
detailed routines

- Implication of market dynamic in effective DC:


1. Sustainability of the capabilities varies with the dynamism of the market
Moderately dynamic: DC are complicated, predictable, analytical process of
existing knowledge, groove the process more deeply
High-velocity: DC are simple, experiential, and iterative. But, too simple
lead to easily to forget. Therefore, constant energy to stay on track is
needed.
2. Causal ambiguity of DC varies with market dynamism.
Moderately dynamic: DC are causally ambiguous because they are
complicated and difficult to observe
High-velocity: DC are simple because they obscure the fundamental
commonalities that the effectiveness of the capabilty

Evolution of dynamic capabilities


- Learning mechanism guide the evolution of DC
1. Repeated practiced, help people to understand processes more fully and
develop more effective routines
2. Mistakes, contribute to effective learning from the experience, because
(small) failure provide greater attention to the process
3. Pacing of experience, too fast and too rare are not good because people
dont have opportunity to improve their skills
4. Market dynamism, through moderate and high-velocity markets
5. Consequential, DC is combination of simpler capabilities and related
routines
- Effective implementation requires knowing the ingredients and the recipe

Discussion
DC are not tautological, vague, and endlessly recursive
DC are well-known processes that have been studied in their own right,
apart from RBV
DC manage the resources by creating, integrating, recombining, and
releasing them
DC exhibit commonalities across firm that are associated with superior
effectiveness
This study expanded review of routines in terms of moderately and highvelocity market
This study address the evolution of DC that was shaped by learning
mechanism

Towards a new perspective on the RBV


1. RBV is VRIN. DC have commonalities across firms in term of key
features. DC may have competitive adv but not long-term
competitive adv
2. RBV believes in long-term competitive adv. The reality, it is difficult
to achieve competitive adv in dynamic markets
3. RBV focus on leveraging bundled resources to achieve long-term
competitive adv., DC in high-velocity focus on creating a series of
unpredictable adv through timing and loosely structured
organization

Conclusion
DC include well-known organizational and strategic processes
(alliance and product development)
RBV faces a boundary condition in high-velocity market where the
duration of competitive adv is unpredictable
In this condition, the strategic imperative is not leverage (RBV), but
change (DC)