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Learn more. Volume 41 , Issue 2. The full text of this article hosted at iucr. If you do not receive an email within 10 minutes, your email address may not be registered, and you may need to create a new Wiley Online Library account. If the address matches an existing account you will receive an email with instructions to retrieve your username.

Constance E. Read the full text. Tools Request permission Export citation Add to favorites Track citation. Share Give access Share full text access. Share full text access. Please review our Terms and Conditions of Use and check box below to share full-text version of article. No abstract is available for this article. Citing Literature. Finally, even when an asset in profits are greater than interindustry differences can be purchased, firms may stand to gain little by in profits, strongly suggesting the importance of doing so.

As Barney points out, unless a firm-specific factors and the relative unimportance firm is lucky, possesses superior information, or of industry effects. I6 Jacobsen and Hansen both, the price it pays in a competitive factor and Wemerfelt made similar findings.

David J.Teece's Dynamic Capabilites and Strategic Management: Organizing for Innovation and Growth

A comparison of the resource-based approach Given that in the resources perspective firms and the competitive forces approach discussed possess heterogeneous and sticky resource earlier in the paper in terms of their implications bundles, the entry decision process suggested by for the strategy process is revealing. From the this approach is as follows: 1 identify your first perspective, an entry decision looks roughly firm's unique resources; 2 decide in which mar- as follows: 1 pick an industry based on its kets those resources can earn the highest rents; 'structural attractiveness' ; 2 choose an entry and 3 decide whether the rents from those assets strategy based on conjectures about competitors' are most effectively utilized by a integrating rational strategies; 3 if not already possessed, into related market s , b selling the relevant acquire or otherwise obtain the requisite assets to intermediate output to related firms, or c selling compete in the market.

From this perspective, the the assets themselves to a firm in related busi- process of identifying and developing the requi- nesses Teece, , The The resource-based perspective puts both verti- process involves nothing more than choosing cal integration and diversification into a new stra- rationally among a well-defined set of investment tegic light. Both can be viewed as ways of captur- alternatives.

If assets are not already owned, they ing rents on scarce, firm-specific assets whose can be bought. The resource-based perspective is services are difficult to sell in intermediate mar- strongly at odds with this conceptualization.

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Further, resource endow- formance and diversification by Wemerfelt and ments are 'sticky:' at least in the short run, firms Montgomery provides evidence for this are to some degree stuck with what they have proposition. It is evident that the resource-based and may have to live with what they lack. First, business existing firm-specific assets. See, for example, Womack, Jones, and Roos, source of economic profits, then it follows that ; Hayes and Clark, ; Barney, Spender and Reve, such issues as skill acquisition, the management ; Clark and Fujimoto, ; Henderson and Cockburn, ; Nelson, ; Levinthal and Myatt, Rumelt showed that stable learning become fundamental strategic issues.

It industry effects account for only 8 percent of the variance in is in this second dimension, encompassing skill business unit returns. Furthermore, only about 40 percent of the dispersion in industry returns is due to stable industry acquisition, learning, and accumulation of organi- effects. Capability development, however, is not really analyzed. Dynamic Capabilities 5 15 and Roehl, , that we believe lies the greatest are influenced by past choices.

At any given point potential for contributions to strategy. This path not The dynamic capabilities approach: Overview only defines what choices are open to the firm today, but it also puts bounds around what its The global competitive battles in high-technology internal repertoire is likely to be in the future.

Publications — David J. Teece

Well-known The notion that competitive advantage requires companies like IBM, Texas Instruments, Philips, both the exploitation of existing internal and and others appear to have followed a 'resource- external firm-specific capabilities, and developing based strategy' of accumulating valuable tech- new ones is partially developed in Penrose nology assets, often guarded by an aggressive , Teece , and Wernerfelt However, this strat- However, only recently have researchers begun egy is often not enough to support a significant to focus on the specifics of how some organiza- competitive advantage.

Several internal and external competences. The term 'dynamic' refers to the , Williamson , , Barney , capacity to renew competences so as to achieve Nelson and Winter , Teece , and congruence with the changing business environ- Teece et al. The term 'capabilities' emphasizes Terminology the key role of strategic management in appropri- ately adapting, integrating, and reconfiguring In order to facilitate theory development and internal and external organizational slulls, intellectual dialogue, some acceptable definitions resources, and functional competences to match are desirable.

We propose the following. One aspect of the strategic problem facing l9Deciding, under significant uncertainty about future states an innovating firm in a world of Schumpeterian of the world, which long-term paths to commit to and when competition is to identify difficult-to-imitate to change paths is the central strategic problem confronting internal and external competences most likely to the firm. In this regard, the work of Ghemawat is highly germane to the dynamic capabilities approach to support valuable products and services. Thus, as strategy.

Dierickx and Cool Chandler Shuen to which a core competence is distinctive depends Factors of production on how well endowed the firm is relative to its These are 'undifferentiated' inputs available in competitors, and on how difficult it is for com- disaggregate form in factor markets. By undiffer- petitors to replicate its competences. Land, unskilled labor, and capital are Dynamic capabilities typical examples.

Some factors may be available for the taking, such as public knowledge. In the We define dynamic capabilities as the firm's language of Arrow, such resources must be 'non- ability to integrate, build, and reconfigure internal fugitive. Dynamic capabilities thus reflect an organization's ability to achieve new and innovative forms of competitive advantage given path dependencies and market positions Resources are firm-specific assets that are difficult Leonard-Barton, Trade secrets and certain specialized production facilities and engi- Products neering experience are examples.

Such assets are difficult to transfer among firms because of trans- End products are the final goods and services actions costs and transfer costs, and because the produced by the firm based on utilizing the com- assets may contain tacit knowledge. The performance price, quality, etc. Examples include Different approaches to strategy view sources of quality, miniaturization, and systems integration. The competi- tiple product lines, and may extend outside the tive forces framework sees the strategic problem firm to embrace alliance partners.

Core competences have focused on the exploitation of firm-specific must accordingly be derived by looking across assets. Each approach asks different, often com- the range of a firm's and its competitors prod- plementary questions. A key step in building a ucts and services. The degree distinctive and difficult-to-replicate advantages can be built, maintained, and enhanced. ZZ Arrow defines fugitive resources as ones that can A useful way to vector in on the strategic move cheaply amongst individuals and firms.

We prefer to use the term firm-specific asset. We identify what is not strategic. To be strategic, a use it here to try and maintain links to the literature on the resource-based approach which we believe is important. Dynamic Capabilities 5 17 capability must be honed to a user needz6 so to coordinate activity.

If the ability difficult to replicate so profits will not be com- to assemble competences using markets is what peted away.

Dynamic Capabilities

Accordingly, any assets or entity is meant by the firm as a nexus of contracts which are homogeneous and can be bought and Fama, , then we unequivocally state that sold at an established price cannot be all that the firm about which we theorize cannot be use- strategic Barney, What is it, then, about fully modeled as a nexus of contracts. By 'con- firms which undergirds competitive advantage? The essence of the responsibilities.

Moreover, the firm as a nexus of firm, as Coase pointed out, is that it contracts suggests a series of bilateral contracts displaces market organization. It does so in the orchestrated by a coordinator.

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Our view of the main because inside the firms one can organize firm is that the organization takes place in a more certain types of economic activity in ways one multilateral fashion, with patterns of behavior cannot using markets. This is not only because and learning being orchestrated in a much more of transaction costs, as Williamson , decentralized fashion, but with a viable head- emphasized, but also because there are many quarters operation.

Hence, contrary to Arrow's together overnight. Replication takes time, and view of firms as quasi markets, and the task the replication of best practice may be illusive. In parti- managerial processes which support productive cular, learning and internal technology transfer activity. By construction, the firm's balance sheet may well be jeopardized. It is necessarily the they are domains for organizing activity in a case, therefore, that the balance sheet is a poor nonmarket-like fashion.

In this sense, we are consonant with both Richardson and Williamson 1 , Z9 As we note in Teece er al. Thus a capability can be the basis for the conglomerate form that shareholders cannot obtain for diversification into new product markets. By unlever- ties. Recently, some scholars have begun to attempt to meas- aged we mean that rewards are determined at the group or ure organizational capability using financial statement data. Shuen That which is distinctive cannot be bought and focuses on replication and imitation, as it is these sold short of buying the firm itself, or one or phenomena which determine how readily a com- more of its subunits.

In The firm's processes and positions collectively this paper we merely identify several classes of encompass its competences and capabilities. The essence of competences executive suites, and some in the way everything and capabilities is embedded in organizational is integrated. A difficult-to-replicate or difficult- processes of one kind or another. But the content to-imitate competence was defined earlier as a of these processes and the opportunities they distinctive competence.

As indicated, the key fea- afford for developing competitive advantage at ture of distinctive competence is that there is not any point in time are shaped significantly by the a market for it, except possibly through the mar- assets the firm possesses internal and market ket for business units. Hence competences and and by the evolutionary path it has capabilities are intriguing assets as they typically adoptedlinherited.

Hence organizational processes, must be built because they cannot be bought. We discuss each in We thus advance the argument that the competi- turn. While the price sys- specific asset position, and the paths available tem supposedly coordinates the economy,32 man- to it. How efficiently and effectively internal firm, or what might be referred to as its routines, coordination or integration is achieved is very or patterns of current practice and learning.

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By important Aoki, The growing literature on strategic relations with suppliers and complementors. By paths we refer to the strategic alternatives avail- able to the firm, and the presence or absence of 3Z The coordinative properties of markets depend on prices increasing returns and attendant path depen- being "sufficient" upon which to base resource allocation decisions. A final section the understanding of 'why the costs of organizing particular activities differs among firms' Coase, We argue -- that a firm's distinctive ability needs to be understood as a 31 We are implicitly saying that fixed assets, like plant and reflection of distinctive organizational or coordinative capabili- equipment which can be purchased off-the-shelf by all industry ties.

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  • This form of integration i. In asmuch as financial balance sheets typically could be viable on a stand-alone basis external integration. Dynamic Capabilities 5 19 alliances, the virtual corporation, and buyer- gest that productive systems display high interde- supplier relations and technology collaboration pendency, and that it may not be possible to evidences the importance of external integration change one level without changing others.

    This and sourcing.