transforms what is essentially a static view into one that can
encompass competitive advantage in a dynamic context.
3.7 Understanding Dynamic Capabilities Versus
Resources
The more recent Dynamic Capabilities (DC) Theory makes a
clear distinction between resources and capabilities. Eisenhardt and Martin propose a definition of resources as ‘those
specific physical, human and organisational assets that can
be used to implement value creating strategies” (Eisenhardt
and Martin 2000). The dynamic resources view advances
that if a firm possesses valuable resources but does not
evolve them, using dynamic capabilities, based on environmental dynamics, then it cannot sustain its related advantage.
The many definitions of dynamic capabilities existing in the
literature reflect this notion and distinguish dynamic capabilities from resources as illustrated in the following definitions. The original definition by Teece et al. (1997) is “the
firm’s ability to integrate, build, and reconfigure internal and
external competences to address rapidly changing environments”. Another definition by Helfat et al. (2007) states that
dynamic capabilities are “the capacity of an organization to
purposefully create, extend, or modify its resource base”.
Eisenhardt and Martin (2000) also shares this definition:
dynamic capabilities are the antecedent organisational and
strategic routines by which managers alter their resource
base, acquire and shed resources, integrate them together and
recombine them to create value creating strategies. Having
shared these definitions, many authors believe that the
concept still requires conceptual and empirical developments, and that the scarcity of empirical work around it
makes it difficult to translate it to management recommendations (Ambrosini and Bowman 2009).
3.8 Dynamic Capabilities and Competitive
Advantage
There is a divergence of opinions in the literature regarding
the link between dynamic capabilities and competitive
advantage. However, at least one empirical research by
Breznik and Lahovnik (2014) demonstrated the link between
dynamic capabilities, sustained competitive advantage and
ultimately superior firm performance. In their paper
“Renewing the resource base in line with dynamic capabilities: a key to sustained competitive advantage in the IT
Industry”, they indicate that firms which renew their
resource base in line with the dynamic capabilities view can
generate and sustain a competitive advantage and thus the
related firm performance. They have specifically found that
firms with a stronger commitment to deploying dynamic
capabilities were more successful, and vice versa. This was
concluded based on a research involving in-depth interviews
in six representative of IT firms. Their results also suggest
that firms need to continuously deploy all relevant dynamic
capabilities. A gap in the literature around dynamic capabilities was highlighted by Pisano (2017) to be a lack of
focus on how a capability strategy is to be put together. His
research proceeds to offer a perspective on how to build this
strategy based on concepts, commitment and search (Pisano
2017). This is an area where further research would be very
beneficial.
3.9 The Relevance of Dynamic Capabilities
in Today’s World
Today’s business world is a rapidly evolving one with
multi-faceted challenges. On the one hand, consumers and
customers have increasingly demanding needs of innovation,
customization, availability, and on the other hand, the
business environment displays increasing VUCA (Volatile,
Uncertain, Complex, and Ambiguous). The digital transformation also poses another set of challenges for today’s
businesses as consumers are exposed to many more competing media and have access to new supply chains
(e-commerce, for example). In light of this, there is
increasing pressure on businesses to evolve rapidly to
respond to changes in the increasingly complex and dynamic
environment. In this context, the Dynamic Capabilities
Thinking reinforces the importance of the firm’s ability to
renew its resources and capabilities to deal with the environmental changes and the dynamics of the market, looking
beyond the firm’s specific industry at the total business
ecosystem (Tondolo and Bitencourt 2014).
4 The Paradox of Resources Versus Markets
Despite the fact that the RBV incorporates some discussions
on market orientation under the heading of
“capabilities/intangible assets”, by its very definition, the
RBV places a firm’s resources (as opposed to the environment) at the heart of the strategy generation process. This
has led de Wit and Meyer to describe the RBV as an
inside-out perspective in their book on Strategy Synthesis
(De Wit and Meyer 2005). At the other end of the spectrum
lies the Market orientation view, described by the same
authors as the outside-in perspective. De Wit and Meyer
summarize the paradox of markets and resources (Fig. 3).
It is appropriate at this stage to examine Porter’s definition of competitive advantage, at the heart of which lies the
concept of sustainability. The latter describes a competitive
advantage when it is enduring despite of environmental
304
N. El Daly
encompass competitive advantage in a dynamic context.
3.7 Understanding Dynamic Capabilities Versus
Resources
The more recent Dynamic Capabilities (DC) Theory makes a
clear distinction between resources and capabilities. Eisenhardt and Martin propose a definition of resources as ‘those
specific physical, human and organisational assets that can
be used to implement value creating strategies” (Eisenhardt
and Martin 2000). The dynamic resources view advances
that if a firm possesses valuable resources but does not
evolve them, using dynamic capabilities, based on environmental dynamics, then it cannot sustain its related advantage.
The many definitions of dynamic capabilities existing in the
literature reflect this notion and distinguish dynamic capabilities from resources as illustrated in the following definitions. The original definition by Teece et al. (1997) is “the
firm’s ability to integrate, build, and reconfigure internal and
external competences to address rapidly changing environments”. Another definition by Helfat et al. (2007) states that
dynamic capabilities are “the capacity of an organization to
purposefully create, extend, or modify its resource base”.
Eisenhardt and Martin (2000) also shares this definition:
dynamic capabilities are the antecedent organisational and
strategic routines by which managers alter their resource
base, acquire and shed resources, integrate them together and
recombine them to create value creating strategies. Having
shared these definitions, many authors believe that the
concept still requires conceptual and empirical developments, and that the scarcity of empirical work around it
makes it difficult to translate it to management recommendations (Ambrosini and Bowman 2009).
3.8 Dynamic Capabilities and Competitive
Advantage
There is a divergence of opinions in the literature regarding
the link between dynamic capabilities and competitive
advantage. However, at least one empirical research by
Breznik and Lahovnik (2014) demonstrated the link between
dynamic capabilities, sustained competitive advantage and
ultimately superior firm performance. In their paper
“Renewing the resource base in line with dynamic capabilities: a key to sustained competitive advantage in the IT
Industry”, they indicate that firms which renew their
resource base in line with the dynamic capabilities view can
generate and sustain a competitive advantage and thus the
related firm performance. They have specifically found that
firms with a stronger commitment to deploying dynamic
capabilities were more successful, and vice versa. This was
concluded based on a research involving in-depth interviews
in six representative of IT firms. Their results also suggest
that firms need to continuously deploy all relevant dynamic
capabilities. A gap in the literature around dynamic capabilities was highlighted by Pisano (2017) to be a lack of
focus on how a capability strategy is to be put together. His
research proceeds to offer a perspective on how to build this
strategy based on concepts, commitment and search (Pisano
2017). This is an area where further research would be very
beneficial.
3.9 The Relevance of Dynamic Capabilities
in Today’s World
Today’s business world is a rapidly evolving one with
multi-faceted challenges. On the one hand, consumers and
customers have increasingly demanding needs of innovation,
customization, availability, and on the other hand, the
business environment displays increasing VUCA (Volatile,
Uncertain, Complex, and Ambiguous). The digital transformation also poses another set of challenges for today’s
businesses as consumers are exposed to many more competing media and have access to new supply chains
(e-commerce, for example). In light of this, there is
increasing pressure on businesses to evolve rapidly to
respond to changes in the increasingly complex and dynamic
environment. In this context, the Dynamic Capabilities
Thinking reinforces the importance of the firm’s ability to
renew its resources and capabilities to deal with the environmental changes and the dynamics of the market, looking
beyond the firm’s specific industry at the total business
ecosystem (Tondolo and Bitencourt 2014).
4 The Paradox of Resources Versus Markets
Despite the fact that the RBV incorporates some discussions
on market orientation under the heading of
“capabilities/intangible assets”, by its very definition, the
RBV places a firm’s resources (as opposed to the environment) at the heart of the strategy generation process. This
has led de Wit and Meyer to describe the RBV as an
inside-out perspective in their book on Strategy Synthesis
(De Wit and Meyer 2005). At the other end of the spectrum
lies the Market orientation view, described by the same
authors as the outside-in perspective. De Wit and Meyer
summarize the paradox of markets and resources (Fig. 3).
It is appropriate at this stage to examine Porter’s definition of competitive advantage, at the heart of which lies the
concept of sustainability. The latter describes a competitive
advantage when it is enduring despite of environmental
304
N. El Daly