Capability interactions and adaptation to demand‐side change

Research summaryWe examine how interactions among a firm’s capabilities influence the extent and direction of firm adaptation under conditions of demand‐side change. Our empirical context is the U.S. defense industry, within which we study firms receiving defense‐related Small Business Innovation Research (SBIR) awards around September 11, 2001, an event which constituted an exogenous demand‐side shock in which technology‐related preferences of customers were reshuffled. We find that under demand‐side change, preexisting customer relationships have a double‐edged effect: They facilitate “extension‐based” adaptation when interacted with technology capabilities experiencing a decline in customer preferences, and they hinder “novelty‐based” adaptation when interacted with technology capabilities experiencing an increase in such preferences. We also find that both types of technological capabilities together facilitate adaptation along the extension and novelty paths.Managerial summaryDemand‐side change, in which customer preferences for particular technologies are reshuffled, occurs in many industry settings. A deeper understanding of the factors shaping firm adaptation under this form of change can influence managers’ decisions to implement strategies to plan for and react to such change. Using a sample of firms receiving defense‐related SBIR awards around September 11, 2001, we show that the customer relationships a firm develops prior to demand‐side change can have a double‐edged effect on firm adaptation. Such relationships facilitate “extension‐based” adaptation when combined with technology capabilities declining in customer preferences and hinder “novelty‐based” adaptation when combined with technology capabilities increasing in customer preferences. In addition, the combination of the two technological capability types facilitates adaptation along both paths.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/156170/3/smj3137-sup-0001-Supinfo.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/156170/2/smj3137.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/156170/1/smj3137_am.pd

Organizational Agility through Project Portfolio Management

In dynamic environments, organizational agility is essential for survival; organizations must be able to adapt to change in order to succeed. In project-based organizations, a dynamic project portfolio management (PPM) capability can enhance organizational agility. PPM is an important organizational capability that enables organizations to manage and balance the portfolio holistically, to align projects with strategy, and to ensure adequate resourcing for projects in order to maximize the benefits from project investments. A dynamic PPM capability enables organizations to be agile and flexible by facilitating adjustments to the project portfolio and reallocating resources in response to the changes in the environment. In order for the PPM capability to remain relevant, it must evolve to reflect changes in the environment. Examples of aspects of PPM that enhance organizational agility are outlined in this paper to provide guidance for practitioners

Churn, Baby, Churn: Strategic Dynamics Among Dominant and Fringe Firms in a Segmented Industry

This paper integrates and extends the literatures on industry evolution and dominant firms to develop a dynamic theory of dominant and fringe competitive interaction in a segmented industry. It argues that a dominant firm, seeing contraction of growth in its current segment(s), enters new segments in which it can exploit its technological strengths, but that are sufficiently distant to avoid cannibalization. The dominant firm acts as a low-cost Stackelberg leader, driving down prices and triggering a sales takeoff in the new segment. We identify a “churn” effect associated with dominant firm entry: fringe firms that precede the dominant firm into the segment tend to exit the segment, while new fringe firms enter, causing a net increase in the number of firms in the segment. As the segment matures and sales decline in the segment, the process repeats itself. We examine the predictions of the theory with a study of price, quantity, entry, and exit across 24 product classes in the desktop laser printer industry from 1984 to 1996. Using descriptive statistics, hazard rate models, and panel data methods, we find empirical support for the theoretical predictions

How dynamic capabilities drive performance in the Indian IT industry : the role of information and co-ordination

This study examines key issues and effects of capability management on a fast-growing area of knowledge-intensive global business services &ndash; IT outsourcing and offshoring. An exploratory study is undertaken of Indian companies providing complex process-oriented offshore IT services to their global customers. The analysis of the data related to the service provider side shows that developing dynamic capabilities is strongly driven by management and top-clients and results in the development of business processes and in establishing a strategic partnership with the client organization. Key findings are that information exchange and coordination are the key to a leveraging firm performance.<br /

Ability-based view in action: a software corporation study

This research investigates antecedents, developments and consequences of dynamic capabilities in an organization. It contributes by searching theoretical and empirical answers to the questions: (a) What are the antecedents which can provide an organization with dynamic and ordinary capabilities?; (b) How do these antecedents contribute to create capabilities in an organization?; (c) How do they affect an organization's competitive advantage?; (d) Can we assess and measure the antecedents and consequences to an organization? From a first (theoretical) perspective, this paper searches answers to the first, second and third questions by reviewing concepts of an ability-based view of organizations that involves the abilities of cognition, intelligence, autonomy, learning and knowledge management, and which contributes to explain the dynamic behavior of the firm in the pursuit of competitive advantage. From a second (empirical) perspective, this paper reinforces and delivers findings to the second, third and fourth questions by presenting a case study that evidences the ability-based view in action in a software corporation, where it contributes by investigating: (a) the development of organizational capabilities; (b) the effects of the new capabilities on the organization; and (c) the assessment and measurement of the abilities and consequences

The performance effects of creative imitation on original products: Evidence from lab and field experiments

Research Summary: A market entrant often challenges the incumbent using creative imitation: The entrant creatively combines imitated aspects of the original with its own innovative characteristics to create a distinct offering. Using lab and field experiments to examine creative imitation in China, we find the effects of creative imitations on the originals depend on the creative imitation's quality. We explore the underlying mechanisms, and show that including a low-quality creative imitation in the retail choice set increases satisfaction with and choice of the original, while a moderate-quality creative imitation does the opposite. Moreover, creative imitation affects consumers' satisfaction with the original by influencing whether their experience with the original verifies their expectations. Our paper reveals creative imitation effects to help incumbent firms effectively address them. Managerial Summary: When the incumbent is challenged by an entrant using creative imitation, consumers may react differently to the incumbent, and understanding consumers' reactions allows the incumbent to make better strategic decisions about how to address the challenge. Using lab and field experiments, we investigate creative imitations with two quality levels common in our empirical context, low quality and moderate quality, and examine how and why they differentially affect the originals. We find the presence of a low-quality creative imitation actually increased choice of the original by enhancing consumers' satisfaction with it, while a moderate-quality creative imitation reduced choice of the original by undermining satisfaction with it. Our research suggests the incumbent should address moderate-quality creative imitations' challenges to customer satisfaction, while temporarily tolerating low-quality creative imitations

Ownership competence

Ownership is fundamental to firm strategy, organization, and governance. Standard ownership concepts—mainly derived from agency and incomplete contracting theories—focus on its incentive effects. However, these concepts and theories neglect ownership's role as an instrument to match judgment about resource use and governance with the firm's evolving environment under uncertainty. We develop the concept of ownership competence—the skill with which ownership is used as an instrument to create value—and decompose it into matching competence (what to own), governance competence (how to own), and timing competence (when to own). We describe how property rights of use, appropriation, and transfer relate to the three ownership competences and show how our theory offers a fresh perspective into the role of ownership for value generation