Building Micro-Foundations for the Routines, Capabilities, and Performance Links
40 Pages Posted: 2 May 2007
Date Written: February 2007
Micro-foundations have become an important emerging theme in strategic management. This paper addresses micro-foundations in two related ways. First, we argue that the kind of macro (or "collectivist") explanation that is utilized in the capabilities view in strategic management - which implies a neglect of micro-foundations - is incomplete. There are no mechanisms that work solely on the macro-level, directly connecting routines and capabilities to firm-level outcomes. While routines and capabilities are useful shorthand for complicated patterns of individual action and interaction, ultimately they are best understood at the micro-level. Second, we provide a formal model that shows precisely why macro explanation is incomplete and which exemplifies how explicit micro-foundations may be built for notions of routines and capabilities and for how these impact firm performance.
Keywords: Routines, capabilities, micro-foundations, production function
JEL Classification: L2, M1
Suggested Citation: Suggested Citation