Via The VC Cafe

By Phin Upham

Dynamic capabilities focuses on, according to Teece, Pisano and Shuen (1997), the firm’s ability to achieve success by being responsive to change, building organizational mechanisms to encourage rapid and flexible product innovation, as well as management’s ability to “effectively coordinate and redeploy internal and external competencies.” This focuses on how organizations renew their competencies, about the management and reconfiguration of competencies to achieve new and innovative forms of competitive advantage as it is about exploiting existing competencies. Competitive advantage, thus, lies not only in the specific assets embedded in the form but also in the managerial and organizational processes which manage these resources, by the path dependencies and market positions taken by the firms.

Specifically, Teece, Pisano and Shuen argue that the competitive advantage of a firm lies very intricately connected to its history, skills, and assets. A firm is thus path dependent in order to achieve success, not, as TCE might imply able to maximize given any industry structure. A firms advantage lies in its use of assets in evolutionary and co-evolutionary paths.

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