The Evolving Firm: How Dynamic and Operating Capabilities Interact to Enable Entrepreneurship

20 Pages Posted: 27 Apr 2009

See all articles by Lance R. Newey

Lance R. Newey

University of Queensland - Business School

Shaker A. Zahra

University of Minnesota - Twin Cities - Carlson School of Management

Abstract

In this study, we expand our understanding of firm evolution by focusing on how operating and dynamic capabilities interact through endogenously led changes. The focus on endogenous change complements the current emphasis in the literature on how dynamic capabilities help firms cope with the risk of core rigidities following an exogenous shock. Our comparison of two collaborating firms shows that, at the operating capability level, firms build absorptive capacity in value networks during their product development experiences and this learning needs to be captured at the product portfolio planning level. When this learning is captured and transformed, product portfolio planning acts as a dynamic capability reconfiguring operating capabilities based on beliefs about follow-on entrepreneurial opportunities. Under conditions of endogenous change, dynamic capabilities are guided by a proactive entrepreneurial logic, complementing the need for reactive adaptive responses in circumstances of exogenous change. A key implication is that dynamic capabilities have a more expansive and critical role in the adaptation of firms than previously considered. Our theorizing shows how interactions between dynamic and operating capabilities build the adaptive capacity of the organization.

Suggested Citation

Newey, Lance R. and Zahra, Shaker A., The Evolving Firm: How Dynamic and Operating Capabilities Interact to Enable Entrepreneurship. British Journal of Management, Vol. 20, Issue s1, pp. S81-S100, March 2009. Available at SSRN: https://ssrn.com/abstract=1375871 or http://dx.doi.org/10.1111/j.1467-8551.2008.00614.x

Lance R. Newey (Contact Author)

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Shaker A. Zahra

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

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