Better Results When the Firm Learns to Do More Things
The structural change that global economy underwent in the last twenty years led many management scholars to claim that competitive strategy has changed as well. Competitive strategy is the set of medium- and long-term decisions taken by managers and entrepreneurs at the business unit level, i.e. regarding a single product or market. Competitive strategy is then pivotal in creating competitive advantage and economic, financial and social value.
In the distant past ('70s and '80s) management research highlighted how strategic choices depend on industries' structural features – what we now call "Structure-Conduct-Performance Paradigm". In the recent past ('90s) the growth of many industries and the spreading market globalization have led to focus on the capabilities developed by the corporation as antecedents of the strategic choices – what we call "Resource-Based View Paradigm".
The scarcity of resources and the financial tensions of the recent years has raised doubts about both strategic approaches. Nowadays corporations are constantly in search of flexibility and innovation in order to gain financial and reputational credit on the market.
With the label of "Dynamic Capabilities" a third approach then emerged, interpreting competitive strategy as the search for "dynamic" capabilities which would allow firms to follow more flexible strategic and organizational paths in order to sustain competitive advantage and value creation through innovation. But what exactly are dynamic capabilities?
Gianmario Verona (Department of Management and Technology) suggests a critique to the theoretical debate about dynamic capabilities and offers an empirical solution to understand and measure dynamic capabilities in two papers written with different sets of co-authors and published in Strategic Management Journal and Organization Science.
The Elephant in the Room of Dynamic Capabilities (Strategic Management Journal, 2013, 34, 12: 1389–1410, doi: 10.1002/smj.2078), with Margie Peteraf (Tuck School of Business at Dartmouth) and Giada Di Stefano (HEC Paris), casts light on the main contradictions of the emerging dynamic capabilities theory. Using a bibliometric analysis the authors, on the one hand, underline that the 15-year debate is supported by surprisingly scant empirical analysis and too much theory discussion. On the other, they observe that the debate is highly polarized in two opposing visions – one economic and one sociological – with different starting points and different views of the "dynamic capability" construct. They also observe that these two invisible colleges are not engaged in a constructive dialogue – as was instead the case with the preceding strategy paradigms and with other prevailing economic theories, e.g. the agency theory and the transaction costs theory.
Written with Christian Stadler (Warwick Business School) and Connie Helfat (Tuck School of Business at Dartmouth), the paper The Impact of Dynamic Capabilities on Resource Access and Development (Organization Science, 2013, 24(6):1782-1804, doi: 10.1287/orsc.1120.0810) analyzes a sample of 244 listed companies in the oil industry during the period 1993-2006, in which a price shock also occurred. After controlling for many variables, authors show that corporations with a superior performance along the whole period were engaged in both exploitation (of wells in traditional fields) and exploration (identification of new fields). This conduct has been realized thanks to incremental investments in technologies devoted to these activities – as the authors could learn thanks to primary data obtained from micro surveys to upstream oil investment managers. The authors highlight then that the study of dynamic capabilities can be based on empirical analytical studies about single innovation processes on which strategic flexibility is grounded.