Building Dynamic Capabilities in Rapid Innovation-based Industries
Edited by Stuart Wall, Carsten Zimmermann, Ronald Klingebiel and Dieter Lange
Chapter 1: Leveraging Dynamic Capabilities: A Contingent Management Control System Approach
Ian McCarthy and Brian Gordon1 ABSTRACT Dynamic capabilities help explain why some organizations survive overtime. However, they have been mostly viewed as abstract phenomena with limited attention given to the mechanisms that managers might use to create and direct them. In this chapter, we present a model that explains how contingent management control systems leverage the organizational behaviors necessary for dynamic capabilities. We focus on how variations in environmental velocity affect the characteristics of the feedback that these systems receive. This, in turn, influences control system emphasis and the paradoxical forces of exploitation and exploration that guide and direct the capability processes of coordination/integration, learning and reconfiguration. INTRODUCTION Dynamic capabilities are a firm’s ability to persistently modify or create organizational configurations for competitive advantage and improved viability (Helfat 1997; Teece and Pisano 1994; Teece, Pisano and Shuen 1997; Eisenhardt and Martin 2000; Zollo and Winter 2002; Winter 2003). They have been defined as ‘the ability to integrate, build, and reconfigure internal and external competencies to address rapidly-changing environments’ (Teece et al. 1997, 517). Thus, dynamic capabilities are the higher order capabilities that govern the rate of change in competences (ordinary or operational capabilities), which help firms to make a living in the short term (Collis 1994; Winter 2003; Zahra et al. 2006). However, despite the interest in dynamic capabilities there is limited work (Zollo and Winter 2002; Ethiraj et al. 2005; Subramaniam and 13 14 Strategic reconfigurations Youndt 2005) on how managers create and maintain them. For like the resource-based...
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