Dynamic capabilities

Acronym
DC

Alternate name(s)
Dynamic capabilities perspective

Main dependent construct(s)/factor(s)
Sustainable competitive advantage

Main independent construct(s)/factor(s)
Capabilities, absorptive capacity, environmental turbulence, agility

Concise description of theory
Teece et al. (1997) define dynamic capabilities as ‘the ability to integrate, build, and reconfigure internal and external competencies to address rapidly-changing environments’.

The concept of dynamic capabilities arose from a key shortcoming of the resource-based view of the firm. The RBV has been criticized for ignoring factors surrounding resources, instead assuming that they simply “exist”. Considerations such as how resources are developed, how they are integrated within the firm and how they are released have been under-explored in the literature. Dynamic capabilities attempt to bridge these gaps by adopting a process approach: by acting as a buffer between firm resources and the changing business environment, dynamic resources help a firm adjust its resource mix and thereby maintain the sustainability of the firm’s competitive advantage, which otherwise might be quickly eroded. So, while the RBV emphasizes resource choice, or the selecting of appropriate resources, dynamic capabilities emphasize resource development and renewal.

According to Wade and Hulland (2004), IS resources may take on many of the attributes of dynamic capabilities, and thus may be particularly useful to firms operating in rapidly changing environments. Thus, even if IS resources do not directly lead the firm to a position of superior sustained competitive advantage, they may nonetheless be critical to the firm’s longer-term competitiveness in unstable environments if they help it to develop, add, integrate, and release other key resources over time.

Diagram/schematic of theory
N/A

Originating author(s)
Jay Barney, Kathleen Eisenhardt, David Teece

Seminal articles
Barney, J. (1991) "Firm resources and sustained competitive advantage," Journal of Management (17) 1, pp. 99-120.

Barney, J. B. (1986) "Types of competition and the theory of strategy: toward an integrative framework," Academy of Management Review (11pp. 791-800.

Eisenhardt, K. and J. Martin (2000) "Dynamic capabilities: what are they?," Strategic Management Journal, 21, pp. 1105-1121.

Helfat CE. 1997. Know-how and asset complementarity and dynamic capability accumulation. Strategic Management Journal 18(5): 339-360

Helfat CE. Peteraf MA. 2003. The dynamic resource-based view. Strategic Management Journal 24: 997-1010.

Makadok, Richard (2001). Toward a Synthesis of the Resource-Based and Dynamic-Capability Views of Rent Creation, Strategic Management Journal, 22 (5): 387-402

Priem, R. L. and J. E. Butler (2001) "Is the reosurce-based "view" a useful perspective for strategic management research?," Academy of Management Review (26) 1, pp. 22-40.

Teece, D. J., G. Pisano, and A. Shuen (1997) "Dynamic capabilities and strategic management," Strategic Management Journal (18) 7, pp. 509-533.

Winter, S. (2003) "Understanding dynamic capabilities", Strategic Management Journal, 24, 10, 991-995.

Originating area
Strategic management

Level of analysis
Capability, firm

IS articles that use the theory
Boynton, A C ‘Achieving dynamic stability through information technology’ California Management Review, Vol 35 No 2 (Winter 1993) pp 58-67.

Elizabeth M. Daniel, Hugh N. Wilson, The role of dynamic capabilities in e-business transformation, European Journal of Information Systems, v.12 n.4, p.282-296, December 2003

Jarvenpaa, S. L. and D. E. Leidner (1998) ""An infomation company in Mexico: extending the resource-based view of the firm to a developing country context,"" Information Systems Research (9) 4, pp. 342-361.

King, A. A. and Tucci, C. L. 2002. Incumbent Entry into New Market Niches: The Role of Experience and Managerial Choice in the Creation of Dynamic Capabilities. Manage. Sci. 48, 2 (Feb. 2002), 171-186.

Mendelson, H., 2000, ‘Organizational Architecture and Success in the Information Technology Industry,’ Management Science, 46(4) 513-529

V. Sambamurthy, A. Bharadwaj, and V. Grover, Shaping Firm Agility through Digital Options: Reconceptualizing the Role of IT in Contemporary Firms, MIS Quarterly, Volume 27, Number 2, June, 2003: 237-263.

[http://ssrn.com/abstract=1611789 Trkman, P (2010). The Critical Success Factors of Business Process Management. International Journal of Information Management, 30 (2), 125-134]

Wade, M. and Hulland, J., “The Resource-Based View and Information Systems Research: Review, Extension and Suggestions for Future Research”, MIS Quarterly, 28(1), pp. 107-138, 2004.

Weill, P, Subramani, M., and Broadbent, M. “Building IT Infrastructure for Strategic Agility” Sloan Management Review, 44 (1), Fall 2002, pp. 57-65.

Zahra, S. A., and George, G. “The Net-Enabled Business Innovation Cycle and the Evolution of Dynamic Capabilities,” Information Systems Research (13:2), 2002b, pp. 147-150.

Links from this theory to other theories
Resource-based view of the firm, Absorptive capacity theory, Knowledge-based theory of the firm

Original Contributor(s)
Mike Wade Please feel free to make modifications to this site. In order to do so, you must register. Return to Theories Used in IS Research