Aligning Firm Capabilities with Customer Needs: Unpacking Dynamic Managerial Capabilities

Abstract:     
Organizations are complex systems that require mixtures of capabilities that interact in potentially quite complex ways both within and across points in time. This is particularly true of the dynamic managerial capability in sensing and seizing market opportunities. This study uses an experimental methodology to examine how managers make decisions that align necessary capabilities inside the firm with diverse customer types. Our results reveal that the resource allocation decisions made by managers vary in important ways. In highly commoditized markets managers rely on an intense utilization of discrete operational capabilities that are superior to the competition. In highly differentiated markets these same managers depend on interactions amongst complementary capabilities to enhance the service offering. These results imply that dynamic managerial capabilities can be ambidextrous, in the sense that managers rely on the same set of capabilities for dual purposes.

Number of Pages in PDF File: 39

Keywords: dynamic capability, discrete choice analysis, ambidexterity

JEL Classification: M1, M21

working papers series