Dynamic Capabilties and Competitive Advantage

DYNAMIC CAPABILTIES AND
COMPETITIVE ADVANTAGE
Dr. Wilfridus B. Elu. Seminar Manajemen
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Strategik. MM Perbanas
Definitions
• The term 'dynamic' refers to
the capacity to renew
competences so as to achieve
congruence with the changing
business environment; certain
innovative responses are
required when time-to-market
and timing are critical, the rate
of technological change is
rapid, and the nature of future
competition and markets
difficult to determine (Teece,
Pissano, Shuen, 1997).
• .
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• The term 'capabilities'
emphasizes the key role of
strategic management in
appropriately adapting,
integrating, and reconfiguring
internal and external
organizational skills, resources,
and functional competences to
match the requirements of a
changing environment (Teece,
Pissano, Shuen, 1997).

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• Dynamic capabilities is the firm's ability to
integrate, build, and reconfigure internal and
external competences to address rapidly
changing environments (Teece, Pissaano,
Shuen (1997).
• Dynamic capabilities reflect an organization's

ability to achieve new and innovative forms
of competitive advantage given path
dependencies and market positions
(Leonard-Barton, 1992).

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• The competitive advantage of firms is
seen as resting on distinctive processes
(ways of coordinating and combining),
shaped by the firm's (specific) asset
positions (such as the firm's portfolio
of difficult-to-trade knowledge assets
and complementary assets), and the
evolution path(s) it has adopted or
inherited (Teece, Pissano, Shuen
(1997).

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• The dynamic capabilities approach
seeks to provide a coherent
framework which can both integrate
existing conceptual and empirical
knowledge, and facilitate
prescription.
• Its theoretical foundations provided
by Schumpeter (1934), Penrose
(1959), Williamson (1975, 1985),
Barney (1986), Nelson and Winter
(1982), Teece (1988), and Teece et al.
(1994).
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Assumptions of dynamic capabilities
• The underlying assumption is that
firms, which are able to sense and
then seize new opportunities and,
further, reconfigure their resources and
capabilities in line with recognized
opportunities and environmental change
can create and sustain a competitive
advantage (Teece, 2012, 2009).

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• A key step in building a
conceptual framework
related to dynamic
capabilities is to
identify the
foundations upon
which distinctive and
difficult-to-replicate
advantages can be
built, maintained, and
enhanced.

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• To be strategic, a capability
must be
– honed to a user needs (so
there is a source of
revenues),
– unique (so that the
products/services produced
can be priced without too
much regard to competition)
and
– difficult to replicate (so
profits will not be competed
away).
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Factors for dynamic capabilties
• Three classes of factors
that will help determine a
firm's distinctive
competence and dynamic
capabilities:
– Processes.
– Positions.
– Paths.
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• Managerial and
organizational • Paths: The strategic
processes: The way things alternatives available to the
are done in the firm, or what firm, and the presence or
might be referred to as its absence of increasing
routines, or patterns of returns and attendant path
current practice and learning. dependencies
• Position: organization’s
current specific endowments
of technology, intellectual
property, complementary
assets, customer base, and its
external relations with
suppliers and complementors.

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Managerial and organizational
processes
Organizational processes have three roles:

1. Coordination/integration (a static concept);
2. Learning (a dynamic concept); and
3. Reconfiguration (a transformational
concept).

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Coordination/integration
• Managers coordinate or
integrate activity inside the
firm.
– How efficiently and
effectively internal
coordination or integration is
achieved is very important
(Aoki, 1990).
– External coordination:
strategic advantage requires
the integration of external
activities and technologies.
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Learning
• Learning is a process by
which repetition and
experimentation enable
tasks to be performed
better and quicker. It also
enables new production
opportunities to be
identified.

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Key Characteristics of Learning
1. Learning involves organizational as well as

individual skills.
2. The organizational knowledge generated by

such activity resides in new patterns of activity,
in 'routines,' or a new logic of organization.

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Reconfiguration (a transformational
concept).
• The ability to sense the need to reconfigure
the firm's asset structure, and to accomplish
the necessary internal and external
transformation (Amit and Schoemaker, 1993;
Langlois, 1994

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Position
• Specific assets:
Difficult-to-trade
knowledge assets and
assets complementary
to them, as well as
organization’s
reputational and
relational assets

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Specific assets
1. Technological assets
2. Complementary assets
3. Financial assets
4. Reputational assets
5. Structural assets
6. Institutional assets
7. Market (structure) assets
8. Organizational boundaries

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Paths
• Path dependencies
• Technological
opportunities

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DYNAMIC CAPABILITIES AND
COMPETITIVE ADVANTAGE

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Thank you.

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Dynamic Capabilties and Competitive Advantage

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DYNAMIC CAPABILTIES AND

Dr. Wilfridus B. Elu. Seminar Manajemen

• Dynamic capabilities reflect an organization's

Dr. Wilfridus B. Elu. Seminar Manajemen

Dr. Wilfridus B. Elu. Seminar Manajemen

Dr. Wilfridus B. Elu. Seminar Manajemen

Dr. Wilfridus B. Elu. Seminar Manajemen

Dr. Wilfridus B. Elu. Seminar Manajemen

Organizational processes have three roles:

Dr. Wilfridus B. Elu. Seminar Manajemen

Dr. Wilfridus B. Elu. Seminar Manajemen

1. Learning involves organizational as well as

2. The organizational knowledge generated by

Dr. Wilfridus B. Elu. Seminar Manajemen

Dr. Wilfridus B. Elu. Seminar Manajemen

Dr. Wilfridus B. Elu. Seminar Manajemen

Dr. Wilfridus B. Elu. Seminar Manajemen

Dr. Wilfridus B. Elu. Seminar Manajemen

Dr. Wilfridus B. Elu. Seminar Manajemen

Dr. Wilfridus B. Elu. Seminar Manajemen

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