The Restructuring of Dynamic Capabilities Through Corporate Expansion

Abstract:     
This paper analyses the restructuring of dynamic capabilities following M&A-based growth in large industrial firms with a substantial technological knowledge base. In particular, we focus on the restructuring of those technological capabilities that are of a general purpose kind (namely ICT) or related to the core capabilities of a firm. We develop and test a conceptual framework grounded on a co-evolutionary view, that relates different motivations and environmental contexts for corporate expansion to the firm-specific pattern of restructuring in the composition of corporate technological capabilities. We find that distinct patterns of dynamic capability restructuring are associated with each combination of the motivations and environment for firm growth. In particular, inter-industry contexts reduce technological relatedness in market-motivated expansions, while relatedness has also declined in more recent technology-motivated growth in general. The acquisition of ICT is common as well to both technology-motivated inter-industry deals and more recent market-motivated deals. However, we speculate that any similarities in the outcomes of these alternative motives for firm growth arise for quite different purposes.

Keywords: dynamic capabilities, corporate expansion, technology - and market driven motivations

JEL Classification: O32, L1, F23

working papers series