The Limitations of Dynamic Capabilities

Posted: 13 Sep 2019

See all articles by David J. Collis

David J. Collis

Harvard University - Business School (HBS)

Bharat N. Anand

Harvard University - Strategy Unit

Date Written: December 1, 2018

Abstract

The concept of dynamic capabilities draws its theoretical basis from two classic traditions within the strategy field – the resource based view of the firm (RBV) (Wernerfelt, 1984) and market positioning (Porter, 1996)1. A dynamic capability qualifies as a source of sustained heterogeneous firm performance within the RBV framework because it arises from embedded organizational routines that accumulate in a path dependent process – the “stock” explanation of durable advantage (Barney, 1991). Because such a dynamic capability allows a firm to continually reposition itself in product market space, it satisfies the “flow” explanation of current competitive advantage by ensuring that the firm always maintains a wider gap between willingness to pay and cost than competitors (Brandenburger and Stuart, 1996). Indeed, dynamic capabilities seem to give rise to the enviable ability to “always have a competitive advantage in an attractive industry” and so continually deliver superior financial performance regardless of external circumstances.

Suggested Citation

Collis, David J. and Anand, Bharat N., The Limitations of Dynamic Capabilities (December 1, 2018). Harvard Business School Strategy Unit Working Paper No. 20-029, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3452848

David J. Collis (Contact Author)

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Bharat N. Anand

Harvard University - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States
617 495-5082 (Phone)
617 495-0355 (Fax)

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