The Institutional Origins of Dynamic Capabilities in Multinational Enterprises

Industrial and Corporate Change, Vol. 19, No.4, pp. 1225-46, 2010

26 Pages Posted: 25 Oct 2009 Last revised: 13 Oct 2010

Date Written: January 1, 2009

Abstract

This paper argues that a focus on the institutional underpinnings of MNE strategy and behavior is not only consistent with the emerging literature on dynamic capabilities, but it also serves to highlight the unique role played by MNEs in generating new organizational routines by combining locally embedded capabilities with those that are mobile across borders. Firms shape markets rather than the other way around, because of the role organizational innovation plays in redefining the rules of selection in the operating environment. Of such innovations, some proportion will remain proprietary, while others become diffused more widely in the industry, as the choices made by pioneering firms are imitated by others. We argue that the combination of increasing interconnections between geographically dispersed markets and the greater use of market-based transactions have intensified the incentives for MNEs to engage in the development of new routines, and to formalize them into transferrable practices. This is likely to increase the overall transparency of the origins of firm capabilities, leading potentially to more specialization and less internalization at the industry level.

Keywords: multinational enterprises, dynamic capabilities, routines, knowledge transfer

JEL Classification: F23, D8, D21, M16, L14, L2

Suggested Citation

Dunning, John H. and Lundan, Sarianna M., The Institutional Origins of Dynamic Capabilities in Multinational Enterprises (January 1, 2009). Industrial and Corporate Change, Vol. 19, No.4, pp. 1225-46, 2010, Available at SSRN: https://ssrn.com/abstract=1493222

John H. Dunning

Reading University

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom
+44 0 1491 628 602 (Phone)
+44 0 1491 628 602 (Fax)

Sarianna M. Lundan (Contact Author)

University of Bremen ( email )

FB 7
Hochschulring 4
Bremen, D-28359
Germany

HOME PAGE: http://www.img.uni-bremen.de

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