On the nature of capabilities: Empirical study on digital transformation

Abstract

In the strategic management field, studies of strategic change emphasize the role of change-enhancing capabilities (dynamic capabilities) putting less attention to the stability-enhancing role of capabilities (ordinary or operational capabilities, Winter, 2003; Teece, 2012), which are often regarded as sources of path dependencies and rigidities that slow down or even hamper change. Päivi Maijanen-Kyläheiko introduces her work-in-progress study that aims to overcome this dichotomy and highlights the often forgotten value of stability in times of change. The study is based on the ideas of the evolutionary economics (Nelson & Winter, 1982), according to which an organization needs a certain level of stability in order to be able to change.

This study empirically analyzes the roles of different capabilities during the organizational renewal and develops some ideas how to measure the impact and stability of capabilities in different units within a company. The empirical analysis is based on longitudinal data collected at the Finnish Broadcasting Company. According to the quantitative results, even the incumbents with path dependencies and rigidities can learn and build up capabilities. However, the value of the operational and dynamic capabilities depends on (i) the nature of subunits and (ii) their idiosyncratic ability to accomplish practical changes. The main managerial lesson is that different kinds of subunits need different kinds of capabilities to be successful, i.e. to be able to simultaneously fulfill the conditions of efficiency-based fitness (based on operational and semi-dynamic capabilities) and entrepreneurial-based fitness (based on dynamic capabilities). The analysis can also be extended to the discussion on the role of ambidextery in managing change based on Marchian (March, 1991) idea on exploitation and exploration.