Dynamic Capability Theory

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CHAPTER I INTRODUCTION Overview In the past decade, many large organizations have felt strong pressure for dramatically change more than ever before. Most of industries there are powerful forces to change such as new competition, arrival of new technologies, organizational structure, customer base, product market strategy and globalization which necessitate exploration (Volberda, Baden- Fuller and van den Bosch, 2001). In order to respond, firms have adopted a wide variety of approaches including downsizing and rejuvenation. In trying to explain many change situations “Strategic renewal” is one of the several terms that have begun to replace the older phase “Strategic Change”, (Huff, Huff, and Tomas, 1992). Strategic renewal is the keys…show more content…
Moreover, it used to establish hypotheses to link each construct. The concept of the dynamic capability theory views the firm as unique resources capabilities that, if employed in distinctive ways, can create competitive advantage. Dynamic capabilities can be defined as ‘the ability to integrate, build, and reconfigure internal and external competencies to address rapidly-changing environments. The concept of dynamic capabilities arose from a key shortcoming of the resource-based view of the firm. The RBV has been criticized for ignoring factors surrounding resources, instead assuming that they simply “exist”. Considerations such as how resources are developed, how they are integrated within the firm and how they are released have been under-explored in the literature. Dynamic capabilities attempt to bridge these gaps by adopting a process approach: by acting as a buffer between firm resources and the changing business environment, dynamic resources help a firm adjust its resource mix and thereby maintain the sustainability of the firm’s competitive advantage, which otherwise might be quickly eroded. So, while the RBV emphasizes resource choice or the selecting of appropriate resources, dynamic capabilities emphasize resource development and renewal. This theory is applied to explain the phenomenon of strategic management renewal orientation. That is, strategic management renewal is the capacity of the firm in terms of the process and systems that have unique characteristic. In particularly, strategic management renewal orientation which are internal capabilities to increase competitive advantage, enhance firm performance and lead to firm sustainability. According to Wade and Hulland (2004), IS resources may take on many of the attributes of dynamic

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