DYNAMIC CAPABILITIES:

Transcription

1 CCC Faculty Day 2016, Bocconi University (I) DYNAMIC CAPABILITIES: MICRO-PROCESSES AND MACRO OUTCOMES Stefano Brusoni, ETH Zürich

2 Objectives Not provide an overview of micro research on DCs Focus on how a DCs perspective can help the ongoing quest for managerially significant micro-processes. The quest for relevance à why The quest for cumulativity à which The quest for (non trivial) aggregation à when Stimulate discussion Why do we need to go micro? How? And how micro is micro?

3 DCs, back then DCs are "the firm s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environment (Teece et al. 1997) Bridge between traditional econ approaches to strategy and the evolutionary discussion about innovation and organizations Processes, positions and paths Consistent with (back then) emerging evidence of persistent intraindustry variance DCs are a set of specific and identifiable processes (Eisenhardt and Martin, 2000: 1105) The macro developments Spin-off discussions: business model innovation (e.g Amit and Zott, 2001) and business ecosystems (e.g. Adner and Kapoor, 2010) 8/3/16 3

4 Microfoundations of DCs Nelson & Winter -like microfoundations: Routines (e.g. Zollo and Winter, 2002) + Bounded rationality (e.g. Teece, 2007, Helfat and Peteraf, 2009) 8/3/16 4

5 Microfoundations of DCs Nelson & Winter -like microfoundations: Routines (e.g. Zollo and Winter, 2002) + Bounded rationality (e.g. Teece, 2007, Helfat and Peteraf, 2009) Routines Considerable (and consistent) developments The discussion about the routine-enabled interplay between stability and change, e.g. Feldman (2000) à Felin et al (2012) JMS special issue for a comprehensive review 8/3/16 5

6 Microfoundations of DCs Nelson & Winter -like microfoundations: Routines (e.g. Zollo and Winter, 2002) + Bounded rationality (e.g. Teece, 2007, Helfat and Peteraf, 2009) Bounded rationality Considerable, but less cumulative Behavioral stream: Gavetti and Levinthal (2000) à Hodgkinson and Healey (2011) à Helfat and Peteraf (2015) à Social cognition stream: Porac et al. (1989), Barr et al. (1992), Bettis and Prahalad (1995), Kaplan (2008), Tripsas (2009), Eggers (2015) à 8/3/16 6

7 Why do we need them? [I] The gap issue (quest for realism) As field progress, evidence suggests that assumptions about micro-level uniformity prove unsustainable and inaccurate (Felin et al. 2012: 1354). Heterogeneity at micro-level is related (explains?) macro-level outcomes (E.g.: Edmonson et al. 2001; Adner and Helfat, 2003, Felin and Hesterly, 2007) 8/3/16 7

8 Why do we need them? [II] The relevance issue (quest for traction) "the Arrow-Debreu world is based on a full-employment assumption, and this is logically inconsistent with unemployment in macromodels. (Weintraub, 1977: 2, emphasis added) Given that the structure of an econometric model consists of optimal decision rules of economic agents, and that optimal decision rules vary systematically with changes in the structure of series relevant to the decision maker, it follows that any change in policy will systematically alter the structure of econometric models. (Lucas, 1997: 41, emphasis added) 8/3/16 8

9 Which micro-foundations? [I] Paths Dynamic capabilities [II] Positions [III] Processes

10 Which micro-foundations? [I] Paths Dynamic capabilities [I] Paths [II] Positions [III] Processes Given some micro level invariant, predict macro level [outcome] Invariant optimism, risk aversion, genetic make up, etc. Outcome investment, entry, start-up, network activation Simple, very common in many fields (e.g. entrepreneurship, social network analysis) But: which invariant do we pick? And then, so what?

11 Which micro-foundations? [I] Paths Dynamic capabilities [II] Positions [III] Processes

12 Which micro-foundations? [II] Positions Dynamic capabilities [I] Paths [II] Positions [III] Processes Given some constellations of invariants, predict macro level [outcome] Constellation of invariants Some aggregate notion of experience Personality (TCI vs. Big 5) Mental maps, identity, frames, logics (some) Neuro-anatomy Outcome Innovativeness, creativity, ambidexterity, survival Interesting, potential to understand changes through analysis of relationships across invariants (less invariant than single traits )

13 Which micro-foundations? [I] Paths Dynamic capabilities [II] Positions [III] Processes

14 Which micro-foundations? [III] Processes Dynamic capabilities [I] Paths [II] Positions [III] Processes Given some complex executive functions, predict [outcome] Executive functions Managerial cognitive capabilities Cognitive control capabilities Interplay of hot&cold rationality Outcome Organizational change, adaptation, renewal, sustained performance Extremely interesting to develop logically consistent micro-foundations of strategies that can be executed. Still non-deterministic

15 When are microfoundations most interesting? When there is some form of emergence (e.g. Barley and Felin, 2013) Aggregation tensions between micro-level paradigms and meso/macro-level patterns

16 When are microfoundations most interesting? Three tensions The sources of persistent heterogeneity à paths/traits People are different of course, yet some of these differences are not as persistent as we might have thought E.g. traits vs. states vs. processes E.g.: time orientation (e.g. Criscuolo et al. 2016) [OB vs. social psychology vs. neurosciences?]

17 When are microfoundations most interesting? Three tensions Organizational and individual ambidexterity E.g. O Reilly and Tushman, 2004; Gibson and Brirkinshaw, 2004; Laureiro et al 2014 How to overcome inertia à positions/profiles The origins and evolution of mental maps, identities, frames. Laureiro et al. (2016) on cognitive flexibility

18 When are microfoundations most interesting? Three tensions Cheating and creativity vs. social sustainability discussion E.g. Gino & Ariely, 2012; Battilana and Dorado (2010) How to reconcile business and society à processes E.g. Dereky et al. (2016); La Cara et al. (2016)

19 Discussion points Do we need microfoundations to develop more realistic models of decision making? If so, plenty of very cool work in the social cognition area which is quite microfounded AND does not need new methods, technologies etc. Do we need microfoundations to develop more actionable models of strategic decision making? Direct observation of a number of commonly-used concepts (e.g. attention) Origins of meso-level constructs (e.g. frames, mental maps) How do people respond to strategies? Can DCs help us in giving traction to this discussion? Yes because: Can be used to organize wide variety of micro-to-macro studies Can provide guidance as to where and how much to drill Can give us a reference point to answer the so what question

20 THANK YOU!

21 NEED GRAPHICAL IDEA FOR THIS ONE BUILDING BLOCKS OF DCs Processes, ways of coordinating and combining Positions, portfolio of difficult to trade assets BUILDING BLOCKS OF MFs Executive functions E.g. Cog control capabilities, hot and cold rationality, but also FRAMES From traits to profiles E.g. TCI vs Big 5 Paths, history matters Traits, genetics, stable features E.g. self monitoring and dormant ties

22 Macro developments Excellent at making sense of messy change bassoprocesses in high velocity environments (Eisenhardt and Martin, 2000) E.g.: 3D printing industry Relatively stable technology right now Great variety of strategies as firms rely on idiosyncratic processes, positions and paths Printers vs. Products vs. Solutions vs. (big) Troppo spazio in alto poco in Focus beyond boundaries of focal organization How to create and design complex patterns of interdependencies across technological and organizational elements 8/3/16 22

23 Notes for spech Social psychology Plenty of traits From traits to profiles E.g. TCI vs. composites Cognitive sciences Plenty of hierarchically organized traits and processes How to change traits, how to deal with change E.g. executive functions, cognitive control capabilities Managerial cognitive capabilities (e.g. Helfat and Peteraf, 2015) Cognition and a bit more (e.g. Hogdkins and Healey, 2011) Genetics Boh. Social cognition, please. Kaplan, Tripsas, Rerup etc. Check def for position, path and processes. Than match Positions = traits Processes = cognitive things Paths = profiles? Examples of this would be Hodgkinson (connect hot and cold), HP find micro for SSR Why so? This stuff is potentially plastic. Not fixed, not given. Malleable

24 What do we aim the drill at?

25 Interesting aggregation problems: three tensions The sources of persistent heterogeneity à paths/traits People are different of course, yet some of these differences are not as persistent as we might have thought E.g. traits vs. states [OB vs. social psychology vs. neurosciences?] How to overcome inertia à positions/profiles The origins and evolution of mental maps, identities, frames. Organizational and individual ambidexterity E.g. O Reilly and Tushman, 2004; Gibson and Brirkinshaw, 2004; Laureiro et al 2014 How to reconcile business and society à processes/exfun Cheating and creativity vs. social sustainability discussion E.g. Gino & Ariely, 2012; Battilana and Dorado (2010)

26 Sources: all images from Internet 8/3/16 26