Dynamic capabilities

In organizational theory, dynamic capability is the capability of an organization to purposefully adapt an organization's resource base. The concept was defined by David Teece, Gary Pisano and Amy Shuen, in their 1997 paper Dynamic Capabilities and Strategic Management, as 'the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments'. In organizational theory, dynamic capability is the capability of an organization to purposefully adapt an organization's resource base. The concept was defined by David Teece, Gary Pisano and Amy Shuen, in their 1997 paper Dynamic Capabilities and Strategic Management, as 'the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments'. The term is often used in the plural form, dynamic capabilities, emphasizing that the ability to react adequately and timely to external changes requires a combination of multiple capabilities. The phrase 'dynamic capabilities' was introduced in a working paper by David Teece, Gary Pisano, and Amy Shuen.The final, peer-reviewed version was published in 1997. The idea of dynamic capabilities is similar in some ways to the previously existing concept of operational capabilities; the latter pertains to the current operations of an organization, whereas the former, by contrast, refers to an organization's capacity to efficiently and responsively change these operations and develop its resources. The main assumption of this framework is that an organization's basic competencies should be used to create short-term competitive positions that can be developed into longer-term competitive advantage. Nelson and Winter, in their 1982 book An Evolutionary Theory of Economic Change, link the growth of the concept of dynamic capabilities to the resource-based view of the firm and the concept of 'routines' in evolutionary theories of organization. Douma and Scheuder describe it as a bridge between the economics-based strategy literature and evolutionary approaches to organizations. The resource-based view of the firm emphasizes sustainable competitive advantage; the dynamic capabilities view, on the other hand, focuses more on the issue of competitive survival in response to rapidly changing contemporary business conditions. Strategy scholars Gregory Ludwig and Jon Pemberton, in one of the few empirical studies on the topic, called for clarification of the specific processes of dynamic capability building in particular industries to make the concept more useful to senior managers who set directions for their firms. Dynamic capabilities theory concerns the development of strategies for senior managers of successful companies to adapt to radical discontinuous change, while maintaining minimum capability standards to ensure competitive survival. For example, industries which have traditionally relied on a specific manufacturing process can't always change this process on short notice when a new technology arrives; when this happens, managers need to adapt their own routines to make the most of their existing resources while simultaneously planning for future process changes as the resources depreciate. Similarly, the kind of changes that the theory is emphasizing are the internal capabilities rather than only looking into the external business forces. The New Dynamic Capabilities framework, posed by Amy Shuen in her analysis of Web 2.0, focuses on the firm's ability to quickly orchestrate and reconfigure externally sourced competences,ranging from Apple, Google Android, IBM Linux developer ecosystems to crowdsourced, crowdfunded open innovations such as the Obama08 mobile app—while leveraging internal resources such as platforms, know-how, user communities and digital, social and mobile networks. The New Dynamic Capabilities framework takes into account digital, information and network economics and the fall of the transaction costs of involved in using specialized services. According to Philip Cordes-Berszinn and Basiouni, though, more research is needed in order to measure the 'capabilities' and to appropriately apply the ideas to practical management situations. Many scholars have argued that the dynamic capability theory is vague and tautological . This is a critical issue, and while the theory remains very helpful when addressing how to respond to the business changing environment, it may fail to describe exactly how. Further, Lawson and Samson suggest that the capabilities of the theory are difficult to identify and/or operationalized, and in some cases, those very capabilities can lead to a core capability becoming core rigidity. As such, the use of the theory in its current state is difficult without being able to further specify, develop, and identify those capabilities.