Dynamic Capabilities

Like the Resource-Based View, dynamic capabilities theory emerged in the field of strategy.

This theory is grounded in Neo-Austrian or Schumpeterian Economics which views competition as a process (Alchain, 1950; Schumpeter, 1950; Nelson & Winter 1982).

It is similar the RBV of the firm in that it views competitive advantage as the result of valuable capabilities (resources) that are a result of an enterprise’s history. In this theory, capabilities emerge over time as a result of learning from trial and error. They are a path dependent product of a firm’s history.

The arguments in this theory are as follows:

  • Capabilities reside in the routines of an organization (Nelson & Winter, 1982)
  • Routines capture the knowledge base of an organization.
  • Routines have a substantial tacit dimension
  • Organizations remember by doing.
  • Capabilities are not static; they evolve over time as a result of trial and error as enterprises learn – they are dynamic (Teece et al, 1997).
Key articles on New-Austrian Economics and Dynamic Capabilities include:
  • Alchain (1950)
  • Schumpeter (1950)
  • Nelson and Winter (1982)
  • Nelson & Winter (2002)
  • Chandler (1992)
  • Teece et al (1997)
(Adapted from course notes)
(Flashcards and other resources here)

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