In this paper, Mie Augier and David Teece outline the history and development of the ideas underlying an emerging approach within strategic management research: the dynamic capabili-ties framework. The framework was first outlined by Teece and Pisano (1994), and in the pre-sent paper elaborated further so the reader will be able to appreciate some of the most impor-tant intellectual resources underpinning it, such as the work of Schumpeter, Penrose, William-son, Cyert and March, Rummelt, Nelson and Winter. Although listed as intellectual resources by the authors, they also turn (some of) them into a topic for further discussion. For example, Augier and Teece identify not only the merits but also the limitations of transaction costs eco-nomics. In this way, the authors pave the way for a more dynamic framework while drawing upon organization theory and scholars like Cyert and March (a behavioral theory of the firm) and Nelson and Winter (an evolutionary theory of economic change). In the dynamic capability framework firms and markets co-evolve. Managers are now allowed to perform distinct strate-gic roles in shaping both firms and their markets, e.g. through asset- selection and orchestra-tion, including also the task of allocating resources between exploitation and exploration
