Dynamic Capabilities of Multinational Enterprises: The Dominant Logics Behind Sensing, Seizing, and Transforming Matter!(RESEARCH ARTICLE)
| Verfasser | Matysiak, Lars |
1 Introduction
The dynamic capabilities approach has emerged as a leading lens for studying how firms create and sustain competitive advantages in dynamic environments (Teece 2007a; Teece et al. 1997). Dynamic capabilities exhibit technical fitness if they lead to intended outcomes, and evolutionary fitness if they secure a firm's success in the marketplace (Helfat et al. 2007; Helfat and Peteraf 2009). They can be disaggregated into sensing opportunities (or threats), seizing (or neutralizing) them via expedient investments, and transforming the firm and its resources and capabilities accordingly (Helfat and Martin 2015; Helfat and Peteraf 2015; Teece 2009). The fact that multinational enterprises (MNEs) are--by definition--exposed not only to dynamic industry environments, but also to dynamic country environments, makes dynamic capabilities particularly relevant for their contexts. Nonetheless, scholars have only begun to explicitly consider international business aspects when studying dynamic capabilities (e.g., Teece 2014).
Previous research studied a variety of processes and routines in which dynamic capabilities are embedded and through which they become effective (e.g., Fang and Zou 2009; Moliterno and Wiersema 2007; Pavlou and El Sawy 2006), as well as psychological and cognitive microfoundations (Adner and Helfat 2003; Helfat and Martin 2015; Helfat and Peteraf 2015; Hodgkinson and Healey 2011). Kor and Mesko (2013) theorized that the influence of these microfoundations on the renewal of resources and capabilities is mediated by firms' dominant logics, i.e., management's shared understandings of causal relationships concerning the firm in its competitive environment (Prahalad and Bettis 1986). We shift the focus from the process of dominant logic formation to the content of dominant logics. While our definition of dominant logic builds on Prahalad and Bettis's definition as a mind set or schema that "represents beliefs, theories and propositions" (1986, p. 489), we extend their static, equilibrium-oriented definition, which focuses on one particular "business and the administrative tools to accomplish goals and make decisions in that business" (1986, p. 491). We focus on the dominant logics behind strategic management in dynamic environments. (1) In this paper, we conceptualize the relationships between the evolutionary fitness of MNEs' dynamic capabilities and the dominant logics behind their sensing, seizing, and transforming.
The challenge of applying the dynamic capabilities approach to the international business context lies in explicitly modelling multinational and cross-border aspects. This means considering not only the firm dimension of international business, but also the country dimension, and firm--country interactions, all of which are essential for the management of MNEs (Dunning 1998; Pantzalis 2001; Rugman 1981). The received dynamic capabilities approach, as well as the intellectually and substantively related resource-based view (RBV), (2) focus on the firm dimension. They neither explicitly incorporate the country dimension, nor firm--country interactions. Therefore, they cannot separately analyze the three component parts of MNEs' sources of competitive advantages: non-location bound firm-specific advantages (FSAs), country-specific advantages (CSAs), and location bound FSAs (Arregle et al. 2013; Rugman and Verbeke 1992, 2001).
Previous efforts to reconcile strategic management and international business research emphasize that the dynamic capabilities approach can contribute entrepreneurial insights to the theory of the MNE to better explain the international expansion of firms (Augier and Teece 2007; Pitelis and Verbeke 2007). MNEs may not only exist because of market imperfections, as orthodox internalization theory suggests (Buckley and Casson 1976); rather, MNEs may also exist because they can co-create markets across borders, bringing together their FSAs with complementary, co-specialized assets in host countries with different institutional contexts (Dunning and Lundan 2010; Pitelis and Teece 2010). This is related to the international business literature--which has developed separately from the general dynamic capabilities literature--on MNEs' means of augmenting existing or creating new advantages via recombining resources and capabilities across networks of foreign subsidiaries (Hennart 2009; Kumaraswamy et al. 2012; Rugman and Verbeke 2001, 2003; Rugman et al. 2011; Verbeke 2009). Only recently, Teece (2014, p. 9) set out to "fill voids and inadequacies in the theory of the MNE and competitive advantage by drawing on scholarship on organizational capabilities, business strategy, and entrepreneurship" to demonstrate "how both governance and entrepreneurship/capabilities perspectives are needed to shed light on the nature of the MNE, and the foundations of SCA [sustained competitive advantage]."
Building on this work, we consider the firm and country dimensions of international business, as well as firm--country interactions, to advance theory about MNEs' creation and sustenance of non-location bound FSAs, CSAs, and location bound FSAs. One contribution of this paper is to apply RBV thinking to the international business context, so that resources and capabilities can be analyzed in terms of their rarity along firm boundaries and country borders, and in terms of their value in different industries and in different countries. This allows to separately study the origins of non-location bound FSAs, CSAs, and location bound FSAs. A second contribution of this paper emanates from three theoretically derived propositions and the resulting research framework that summarizes them. We propose that the evolutionary fitness of MNEs' dynamic capabilities is positively related to: (1) a dominant logic behind sensing that is based on the application of RBV thinking to the international business context developed in this paper, (2) a dominant logic behind seizing that is based on internalization theory thinking, and (3) a dominant logic behind transforming that is based on a broad agency perspective extended to the international business context.
The remainder of this paper is organized as follows. We continue with a concise summary of the RBV, the dynamic capabilities approach, and internalization theory. Next, we explicate the key goals of and the dominant logics behind MNEs' sensing, seizing, and transforming. We then discuss our theory development and its implications and offer some conclusions.
2 Literature Review
2.1 Resource-Based View: Origins of Competitive Advantages
The RBV is a firm-internal perspective and concentrates on firms' resources and capabilities to explain competitive advantages, which translate into above-average firm performance (Barney 1991, 1996; Kraaijenbrink et al. 2010; Peteraf 1993; Peteraf and Barney 2003; Wernerfelt 1984). According to the RBV, firms are not equally endowed with resources and capabilities (Wernerfelt 1995). Imperfectly mobile idiosyncratic resources and capabilities are the primary sources of competitive advantages (Amit and Schoemaker 1993; Crook et al. 2008). While resource refers to "productive factors that a firm uses to achieve its business objectives" (Dutta et al. 1999, p. 550), capability refers to "the ability of the firm to combine efficiently a number of resources to engage in productive activity and attain a certain objective" (Dutta et al. 2005, p. 278). Resources reflect inputs, associated with expenditures, whereas capabilities reflect the conversion of inputs into outputs, associated with efficiency (Narasimhan et al. 2006). Despite these analytical differences between resources and capabilities, Newbert (2008, p. 748)--building on Amit and Schoemaker (1993), Makadok (2001), and Penrose (1959)--emphasizes that "while a given resource may have the potential to yield a valuable service, that service will remain latent until deployed via a relevant capability." Accordingly, for the purposes of this paper, we speak of resources and capabilities to refer to useful combinations of the two that yield the intended services.
There is consensus that resources or capabilities must, first of all, be rare and, secondly, valuable in order to entail competitive advantages (Barney 1991; Newbert 2007). Rarity means that neither current nor potential competitors are able to devise and implement the same strategy. It implies that one firm, or a few firms, can utilize focal resources and capabilities, whereas other firms are excluded from utilizing them (Arend and Levesque 2010). Rare resources and capabilities are a prerequisite for competitive advantage because rarity implies that competition is less than perfect (Barney 1991, 2001). Value implies that resources and capabilities must serve to improve effectiveness and/or efficiency. This is the case if they are at the core of a strategy that either exploits opportunities or neutralizes threats (Barney 1991), thus allowing a firm to offer products or services that achieve superior cost efficiency and/or differentiation compared to rival firms (Arend and Levesque 2010; Newbert 2008; Peteraf and Barney 2003).
While there is consensus that rare and valuable resources or capabilities confer competitive advantages at a given point in time, there is also debate about the role of inimitability of resources and capabilities in sustaining competitive advantages based on resources and capabilities over time. Inimitability means that firms that do not possess valuable and rare resources and capabilities cannot obtain them easily (Barney 1991). Arend and Levesque (2010) point out that rarity and inimitability jointly assure that the supply of resources and capabilities remains below demand. Inimitability assures that rarity persists over time, adding a temporal dimension to rarity. Analyzing both rarity and inimitability, therefore, is practically redundant (Crook et al. 2008).
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