The History Of Organizational Capabilities Business Essay

In organization’s success and prosperity there is a major role played by routine and compatibility. The large and challenging variety of processes along which the company develops its routine is also affected by the firm’s capabilities in turn. There are cases in which routines are preceded by capabilities. Non-routine behavior together with improvisational actions could grant practicalities for capabilities. The propositions advance theories of organizational learning and entrepreneurship. First, this research has uncovered a rich set of patterns through firms succeeded or failed to learn from their own experience in developing new routines and capabilities. Secondly a pattern of absorptive inertia has also been found. Some new companies developed the capacity to absorb knowledge from outside the firm but simultaneously developed an unwillingness to absorb external knowledge.

Routine is termed as a distinct manner or approach of organizational actions in organizational and strategic research literature. The individual behaviours in an organization may differ in patterns but not at the cost of company’s goal. Therefore the routine may be subject to change when there are changes in the external environment because organizations cannot be expected to be change resistant. The research by Cohen, (2012) also states about the micro level origins that help to examine the fundamental day to day tasks performed or carried out by individuals in the organization, this in turn forms the routine.

Two theories are claimed to be affected by the routine actions. These are Observation theory and Theory based intervention. There is integration between organizational routine and individual process, which are broadly termed as habits. Habits may be difficult to change and business environments cannot be the same due to changes in the external environment, which demands flexibility. It also states that individual habits can be changed and thus the overall organizational routine. The research that has been conducted shows that there are multiple systems with distinct properties and these systems are of perception and memory. The actions performed are based on the procedural memory that plays a central role in the retention of those actions. The tactic of doing something is referred to the actions carried out through the power of retention. The study states that conscious verbal access to our know-how has been reduced to a great extent. And it is triggered unsuitably by conditions that apparently bear a resemblance to prior experience.

Recent work on visual perception distinguished parallel set of systems known as ventral and dorsal. Ventral pathway is a crucial element in humans that play a main role in speech. Under procedural memory system, the ability to articulate the workings of dorsal perceptual apparatus has reduced. However what triggers the steps taken in skilled or habitual activity are still unknown.

There are important implications for research on organizational routine in the habit system. General properties of organizational routines replicate those of the memory and perceptual systems, which are used when individuals bear in mind and produce their actions as participants in routines. Anticipation allows a greater response of actions and rapid activities.

An understanding of the dorsal perceptual system gave researchers precious insights into foremost aspects of organizational routine, such as collective affordances of artifacts, the role of anticipation in practiced teams, and the understanding of collective purpose.

Innovative results on dorsal perception and the earlier work connecting memory for routine action to non-declarative memory for habits and skills demonstrate that routine action is heavily dependent on the habit system within human individuals. Psychology has been progressively revealing interlinked mechanisms of memory for, and creation of, action that do not depend on deliberation over possible consequences. Action is rather generated and is based on insight of situational features and memory from preceding action. The advancement of this perspective restores for us an understanding of action that complements but does not substitute the perspective of purposeful choice.

Reference:

Cohen, M. D. . (2012). Perceiving and Remembering Routine Action: Fundamental Micro-Level Origins.

Journal of Management Studies. 49 (8), p1384-1386.

Web page: http://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2012.01078.x/pdf on March 3rd 2013

Towards the micro-level origins of Organizational routines and capabilities

Foss, N.,Winter,S.,Zollo,M.

A large amount of literature has been produced on the origins of organizational routines and capabilities at micro level. The role of routines, resources and capabilities has a significant impact on the organizational workings and develops an understanding of the behaviours expected at firm level. This entirely affects the structure of the organization and its overall performance. Whether the activities take place in a group form or individual processes, the result varies in terms of the development of the routines and capabilities. The role of deliberate learning and cognitive knowledge automates the routine behaviour in a firm’s learning processes and marks the initial attempts in the understanding of the micro level origins of college knowledge. Relevant to this is the managerial attention that is a driving force that appears to be relevant for uncovering the micro foundations of organizational development. Moreover, motivation plays an integral role in the development of the organization’s interest alignment that benefits the firm with an increase in individual performance making the organization more competent. It is often difficult to explore the interdependence of the various levels of analysis in the organizational outcomes of learning are uncommon. However, efforts are made to explore the interdependence of routines and capabilities development in the different micro and macro levels within an organization. The entire behaviour observed in an organization is the outcome of the actions and roles of the individuals in the organization. There is need for a detailed research and understanding of the micro level routines and capabilities in order to understand the behaviours in an organizational setting.

To understand the micro-level origins of organizational routines and capabilities the research seeks to encourage fresh concern in the topic of micro-foundations by examining and interpreting papers from various branches of relevant studies such as management sciences, economics, neuroscience, psychology, philosophy, linguistics and sociology. The contributions particularly addressing the questions that ascended above or in either a careful conceptual form or experimental setting are welcomed. All experiential methods that include qualitative, quantitative, field, meta-analytical, and multi-method approaches are considered.

It has been claimed that organizational routines have an immense potential for change due to the external dynamic environment. Even though they are often seemed and even defined as unchanging. Descriptions of routines have been presented showing the change due to the participants responding to outcomes of previous experiences and knowledge of routines. On the basis of such changes in the routines a per formative model of organizational routines has been proposed. It has been suggested that in order to promote continuous change there is an internal dynamic to routines because internal individual performance and strategies also affect the workings of routine. This internal dynamic is based on the addition of routine participants as agents. Routines can be seen as a richer phenomenon when the people who are doing the routines are not separated from the routines. Variations occur as a result of participants' reflections on and reactions to a range of outcomes of previous examples of the routine. This perspective initiates organization into the conception and formation of routine. Organization is important for understanding the role of organizational routines in processes and learning of institutionalization.

Reference:

Foss, N.,Winter,S.,Zollo,M.. (2009). TOWARDS THE MICRO-LEVEL ORIGINS OF ORGANIZATIONAL ROUTINES AND CAPABILITIES. journal of Management Studies. . (.), p1-3.

Web page: http://www.koenheimeriks.com/www/filelib/file/Call%20for%20papers_kh_080925.pdf on March 3rd 2013

DRUID Working Paper No 04-13

Organizational Routines: A Skeptical Look

Felin, T. & Foss, N. J

The research by Felin & Foss, (2004) states that in this research some of the underlying theoretical issues have been explained and the need for micro foundations pertaining to the changing environment has also been explained. There have been some troubles encountered due to the theories that have been collected. In this research it has also been argued that considerations at individual level contributions deserve significantly more thoughtful. Routines have been explained in many different ways but the one that best explains the existing understanding is defined as promising factor for organizations to gain competence and enhance performance in response to the dynamic environment. Routines are seen as collective organizational level constructs that portrays processes and strategies.

Despite the fact that references flourish to notions of organizational routines and capabilities, in the contemporary world where economic changes are so rapid there is no clear definition, measurement or lucid understanding of how exactly they contribute as a competitive advantage to the firm. Altogether it has been noted that routines and organizational capabilities are significant in the development of an organization. Fundamentally, it has been argued that the problem is to a substantial extent routines and capabilities based work that are hard to change, making the individual secondary, and barely leaves space for improvisation at individual level. Ironically, it turns out that much of the routines and capabilities approach is susceptible to the same analysis that is forcefully and justifiably commenced against the neoclassical theory of the firm. Exclusively, it deviates from the tasks carried out at individual level that influence routines to a much greater extent. It however, provides no basis for explaining economic organization because the concept of routines and capabilities cannot be carried out if it lacks practicality because of the unrealistic decision-making. Emphasis has been placed on the negligence of attention that is given to the individual performance in current modern economic and strategic management research. This has proven to be problematic. Individuals have the knack and know how of solving several issues that arise, and before routines can be shaped according to the changing needs. The fundamental assumptions about the humans under this study are absolutely essential. The hope is that this research will serve as a clear call of sorts for evolutionary and capabilities-based scholars to give more vigilant attention to underlying assumptions, and to develop theoretical arguments. This may give individuals dominance and micro-foundations. In addition, more research and concepts need to be applied by the individuals for the smooth operation of routines and capabilities. There has been no problem with the influence organizational structures have on the behavior of individuals. It enhances individual performance according to the changing needs of the environment. Nevertheless it is argued that it is prohibited to begin analysis with structures and routines because their starting point should be of interest and of crucial focus.

Reference:

Felin, T., Foss, N. J.. (2004). Organizational Routines: A Sceptical Look. Journal of Management Studies. 4 (13), P1- 24.

Web page: http://www3.druid.dk/wp/20040013.pdf on March 3rd 2013

Scandinavian Journal of Management Volume 25, Issue 2

Historical drift and a course-correction toward micro foundations

Felin, T. & Foss, N. J.

In the fields related to organizational studies, international business, technology and strategic management, the use and implementation of organizational routines and capabilities have become major contributing factors as stated by (Felin & Foss, 2009). This research has been mainly focusing on the inception of routines and capabilities that reflect the theories based on organizational performances in regard to changing externalities over a period of time. Collective performances are crucial to the current work routines. It forms the basis of organizational performance. The behaviors adopted could be intentional or unintentional and by the degree of effect it has on organizational operations it reveals whether it is noticeable or unnoticeable. In comparison, the theoretical problems pertinent to the concept of routine and capabilities of an organization lack the clarity of how these routines are formed and affected by its very micro foundations. It has been argued that the fundamental individual level micro components and interactional dynamics deserve extra attention in present work calling in effect for a course-correction in work on organizational routines and capabilities. It is highlighted how the importance of the origins of routines, the degree of intention and exceptions, and aggregation and appearance, provide opportunities to make corrections in future research on organizational routines and capabilities.

The key findings pertaining to this research tells about the major areas which have been focused in the study of organizational routines and capabilities. It revolves around

Organizational routines and capabilities, which is the main purpose of this research.

Strategy, that is interlinked with the processes carried out by routines and capabilities.

Micro foundations, that lies within an organization.

Aggregation, which integrates the entire procedure.

Intentionality, which can be related to the habits which are intentional.

Reference:

Felin, T. & Foss, N. J. (2009). Organizational routines and capabilities: Historical drift and a course-correction toward micro foundations. .Journal of Management Studies. 25 (2), p157- 167.

Web Page: http://www.sciencedirect.com/science/article/pii/S0956522109000268 on March 3rd 2013

Topics

Dynamic Capabilities: Routines versus Entrepreneurial Action

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The Nature and Relationship of Routines, Capabilities and Knowledge: An Action-Based Approach.

The Dynamics of Routines and Capabilities in new firms

Journal of Management Studies Vol. 49 no.8.pp. 1395–1401.

Dynamic Capabilities: Routines versus Entrepreneurial Action

David J. Teece

In the research conducted by Teece (2012), it has been stated that in order to institute and maintain advanced financial performance it is an essential requirement to have managerial or entrepreneurial private enterprise. This type of a management does not involve the practice and positive changes in the current routines and formation of new routines only. There are critical roles for entrepreneurial managers to transform the organization and shape or reshape the routines in the competitive and dynamic environment.

To integrate and adjust to the rapidly changing external environment the dynamic capabilities of a firm provides higher levels of competence, which enables firms to make the best use of its internal and external capabilities. It helps the organization to determine the pace and degree to which the company’s major resources can be put into alignment or realignment in order to comply with the requirements and prospects of business environment in order to produce better results that portrays a significant level of efficiency. In order to align resources both inside as well as outside the company, it needs to first align the resources both inside as well as outside the firm. With the growing trade across borders and in general, there has been rapid competitive responses and greater specialization due to the growth in importance of the Dynamic capabilities. In order to become more specialized and successful, businesses need to well align their strategies with other firms in order to achieve the desired goals and satisfy customer needs.

The significance of routines to common capabilities has been acknowledged. As far as the dynamic capabilities are concerned, the respective roles of routines and particular (non-routine) actions by upper management offer a rich and important area for research. Even if managers are often called on to plan and put into observation revolution, the approach in which this occurs can barely be considered entirely routine. Due to the challenges present in the industry where change and restructuring becomes important it challenges the notion that all dynamic capabilities can be diminished to specific routines of the firm.

There are differences in opportunities that may be available for small or large organizations. A small organization may lack the technological efficiency to frequently evaluate the potential opportunities present in the external environment. Complex corporate histories make the study of managerial dynamic capabilities difficult and challenging.

Even though managerial dynamic capabilities can to some degree be traced by making the use of large sets of date which can be best analysed and examined through in-depth and thorough qualitative research. This experimental research is still said to be at an initial stage and opportunities flourish to excavate deeper into the connections between dynamic capabilities, individual or small group managerial actions, and long run firm performance. The research model of dynamic capabilities is also comparatively new.

Key Findings: dynamic capabilities that can be recognized to achieve greater compliance with the external environment, entrepreneurial management which is required to develop strategies to be competent, ordinary capabilities that are formed by routines of the organisation, organizational change and routines are highly interlinked and dependent.

References:

Teece, D. J. . (2012). Dynamic Capabilities: Routines versus Entrepreneurial Action. Journal of Management Studies. 49 (8), p1395- 1400.

Web Page: http://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2012.01080.x/full on March 5th 2013

Strategic Management Journal Strat. Mgmt. J., 24: 1011–1025

CORPORATE EFFECTS AND DYNAMIC MANAGERIAL CAPABILITIES

R. Adner and C. E. Helfat

Reference:

R. Adner and C. E. Helfat (2003) CORPORATE EFFECTS AND DYNAMIC MANAGERIAL CAPABILITIES Strategic Management Journal Strat. Mgmt. J., 24: 1011–1025

Web page: http://0-onlinelibrary.wiley.com.unicat.bangor.ac.uk/doi/10.1002/smj.331/pdf on March 6th 2013

ON THE NATURE AND RELATIONSHIP OF ROUTINES, CAPABILITIES AND KNOWLDEGE: AN ACTION-BASED APPROACH

Katrin, H.N. & Alexander, M.

A firm or entity’s competitive edge is primarily developed and constructed by its conventionally developed capabilities, which define a firm or organization’s relative success and progress level. According to Katrin, H.N. & Alexander, M. (2009), in strategic management, the capability-based view highly emphasizes on explicit capabilities, which are essential to achieve certain business aims or to achieve desired goals. An organization functions through underlying aspects comprising of capabilities and routines, which helps, perform the various activities and tasks. However organizational behavior is not merely determined or driven by the aforementioned factor but by a combination of external factors or social impediments, which restricts its overall performance. Moreover stability and behavioral continuity are resultant factors of routines rather than organizational change. There are many approaches in order to comprehend organizational behavior, changes and the strategic factors that the changes are based on, which will be analyzed forthwith. The phraseological orientation allows one to focus on three aspects i.e. cognitive, creative and normative procedures of how each individual complies to and applies the organizational rules and knowledge.

Organizational routines are deemed to be a significant aspect in organizational analysis, which helps accomplish a firm’s given tasks and activities. Renowned scholars have asserted that organizational routines refer to a recurring pattern of actions executed by a number of people within an organization. Organizational routine helps create and maintain stability, which enhances organizational performance and interaction. Furthermore routines are ramified into four phases of development comprising of interpretation and sense making, coordination and negotiation, transformation and stabilization and elimination and unlearning. These phases are influenced by social practices, which consequently are shaped, monitored and embedded by organizational practices.

Routines and capabilities are deemed as interchangeable in literature and the nexus between the two in context to knowledge and learning largely remains unknown. The notion of routines tends to be static by nature. There is a distinguished perspective or orientation pertaining to organizational routines in literature that catalogs the internal or action-related mechanisms of routines. In accordance to that view organizational routines have a dual nature. Firstly routines are considered to be the repeated social graces or corresponding behavior of each individual and simultaneously are the resultant factors of these activities. On the other hand, capabilities are defined as the conscious reflexivity or spontaneity of the people within an organization and their degree of impulsiveness towards a certain action or decision as stated by Katrin, H.N. & Alexander, M. (2009). Thus, reflexivity is a measure that evaluates the attainment of certain goals as well as the circumstances and consequences of predefined routines so that new routines can be promulgated within the organization if the older ones have become less credible or require changes. The framework that describes the development of routines seeks to provide greater clarity of the research gap.

The four distinct phases mentioned previously constitute of explicit processes, which are highly influential on the degree or level of reflexivity within an organization. Moreover it is also deemed as a significant and underlying feature of capabilities and in each of these phases, capabilities discharge or fulfill a particular function within the organization.

Reference:

Katrin, H. N. and Alexander, M.. (2009). ON THE NATURE AND RELATIONSHIP OF ROUTINES, CAPABILITIES AND KNOWLDEGE: AN ACTION-BASED APPROACH . Journal of Management Studies. . (.), p3-23.

Web Page: http://www.feweb.vu.nl/olkc2009/Papers/7DNinaKatrinHansen.pdf on March 2013

THE DYNAMICS OF ROUTINES AND CAPABILITIES IN NEW FIRMS

Gong, Y., Baker, T. & Mine, A.S.

An organization or entity’s progress, development as well as both internal and external growth are consequentially based upon two significant elements comprising of organizational routines and capabilities. This determines an organization’s level of success and survival. According to Gong, Baker & Mine (2005, pp. 1-31), renowned personalities have introduced and endorsed the notion of routines within organizations as it leads toward synergy, coordination and increased productive efficiency. These routines provide certain guidelines which helps direct various task(s) in order to enhance the overall functioning of the organization by creating and maintaining stability. Moreover routines are deemed to be the underlying elements from which organizational capabilities are derived. In addition, routines are used in large complex organizations and established firms where they are considered as a hypothetical phenomenon which could be empirically verified. However new firms often fail to establish routines and/or capabilities which impedes its natural growth rate, hence we need to identify how and where do routines come from and their relationship with capabilities and other forms of organizational behaviors.

Routines and capabilities as well as the relationship that prevails between the two can be observed and identified through a detailed empirical investigation. This involves a thorough research in the form of quantitative and qualitative data through various sampling methods such as the stratified random sampling approach. Routines have been asserted as repeated patterns of actions within an organization whereas capabilities are built by organizations with the help of existential routines or in other words routines are the underlying and strategic factors that help in the creation of capabilities. A thorough and well defined explanation of organizational capabilities claims that an organization is considered to possess a capability when it can consistently and successfully attain given goals at a certain level of excellence as stated by According to Gong, Baker & Mine (2005, pp. 1-31).

In order to have a clearer comprehension of how routines and capabilities are developed, contradistinctive cases were observed and analyzed in order to derive realistic conclusions.

Upon the various researches gathered and observed, it was believed that a new firm’s network can be deemed as a significant component of routines. This is because founders often encountered problems pertaining to the integration of routines such as those faced by Clone Right group of scientists. Networks therefore help create routines and provide immense help both to the founders as well as the people working in an organization.

Therefore the above narration clearly enlightens the reader as to what routines are, how they are created within an organization and what is the bifurcated relationship that exists between both routines and capabilities. Also it explicates the concept of routines as repeated patterns of action within an organization and how capabilities are derived primarily from the combination of it. Newly established firms often use or employ different behaviors from a spectrum of behaviors in order to meet new challenges and encounter the organizational disputes through it. As new firms do not have prior or pre-set routines to reconcile the issues they encounter, they voluntarily take any action that best befits the situation, is appropriate and available.

Reference:

Gong, Y., Baker, T. & Mine, A.S. . (2005). THE DYNAMICS OF ROUTINES AND CAPABILITIES IN NEW FIRMS. Journal of Management Studies. . (.), p1- 35.

Webpage: http://www.bus.umich.edu/Academics/Departments/CSIB/CSIB/miner_03-11-05_seminar_paper.pdf on March 5th 2013

Topics

Resolving Conflict in Problem-Solving: Systems of Artifacts in the Development of New Routines

From Organizational Routines to Dynamic Capabilities

Organizational Capabilities: Some reflections on the concept

CREATING ORGANISATIONAL CAPABILITIES: LEARNING BY DOING.

Journal of Management Studies. Vol 49, no. 8, pp. 1559-1582

Resolving Conflict in Problem-Solving: Systems of Artefacts in the Development of New Routines

Cacciatori, E.

The research study has made it feasible to attend to a fundamental and unsolved concern in the development of fresh routines, that is, their multi functioning as organizational memory and as truces. These routines have been examined in seclusion with more attention dedicated to observe the remembrance and cognitive aspects than to examining their truce dimension. When routines are considered as memory, the pattern of actions apparently replicates the characteristics of the information that has been stored. The patterning of action is expected to reflect the factors of the fundamental problem of diverging interests. In order to understand how routines develop, it requires an understanding of how the patterning enables routines to carry out the function of memory overlapping with the patterning that enables them to act as truces.

This paper shows that this overlapping occurs because development of routines is mediated by the development of systems of artefacts, which, within their own structures and relationships, reproduce the structures of problem solving and of intra-organizational conflict. This research has highlighted the different nature and characterizations of routines in varying circumstance.

The first and the foremost aspect is the relation between individual skills and capabilities and routines that are followed. In organizations routines are mostly treated as collection of entities and not integrated set of activities, which provides limited linkages at organizational levels. In reality the routines set a clearer picture of how activities within an organization are linked and integrated. These routines made by people embody the assumptions, expertise, and knowledge of those who actually develop them. It helps to regulate the appropriate expertise required to solve day-to-day problems.

Artefacts are known as the routines that are created by the individuals and these are vital links in creating relation between individual and routine of the organization. It transforms the experiences into capabilities a firm can achieve. There are certain issues that exist between the conceptualizations of the routines and the pattern of action of the routines that does not match the cognitive regularities. This is due to the official representation of routines which is action bounded. On the other hand, the routines that are followed by individuals are in response to the changing needs of the organization, which may deviate from the formal description of routine. The reconciliation of routines would be an important aspect of any research. By examining the specific nature of occupation there are some boundary objects to the analysis. It reintegrates the conflicts into analysis of problem solving. Therefore, moving from organizational literature to the resolution of conflicts.

However, this research also has some limitations, which also offer opportunities for extensive research. Organisational routines have problem solving capabilities that require integration among different activities and tasks in an organization. An extensive research may help in developing new and modern processes and routines that will enhance organization performances.

Reference:

Cacciatori, E.. (2012). Resolving Conflict in Problem-Solving: Systems of Artefacts in the Development of New Routines. Journal of Management Studies. 49 (8), p1559- 1582.

Webpage: http://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2012.01065.x/pdf on March 06 2013

From Organizational Routines to Dynamic Capabilities

Zollo, M. & Winter, S.

This research paper has examined the mechanisms through which entities develop dynamic capabilities. According to Zollo & Winter (2007), these mechanisms reflect the experience, knowledge accumulation and knowledge codification processes that restructure and redesign organizational routines. These three mechanisms originate dynamic capabilities. A combination of learning behaviours is adopted that are constituted by partial automated accumulation of experience, knowledge articulation and codification. The purpose of this research has been to develop theoretical model of dynamic capability and effectiveness of capability building keeping in mind the implications of economic changes.

Transformation and improvements in organizational knowledge and competencies have increased the degree of success organizations have. It has major impacts on organizational theory and strategic management. It is important to understand how organizational capabilities evolve over time and come into existence. Competencies of the organizations have their own growth and obsolescence, which organizations must not overlook. Organisations with its own set of routines and integrated operations evolve on the basis of feedbacks based on organizational performances. In order to address to the rapidly changing environments the concept of dynamic capabilities defines the firm’s ability to integrate and build both internal and external competencies.

Organisational routines are a pattern of behaviours that portray organisation’s response to internal and external factors. On receiving of an order from a customer, a decision is made on how it will be executed. What is required, how will it be initiated and what process will be implemented. All these decisions are based on past experience and knowledge. According to Zollo & Winter (2007), there is execution of known processes and procedures called the operational routines or necessary changes that are required may be identified which is called search or learning routine. Both these routines are affected by changes in the dynamic environment. It is necessary for organisational routines to be effective but superior organizational routines are always more beneficial. However, adequate routines are operational as well as a source of advantage that helps organization to respond to environmental changes.

Knowledge evolution is an understanding and comprehensive information of how organizational tasks are executed. It changes due to the external factors that include competitors, geographical changes, climatic changes and scientific discoveries. Apart from external factors, the internal factors like information derived from within the organizations also have a great impact on the knowledge.

According to Zollo & Winter (2007), dynamic capabilities allow organizations to produce and offer innovative products through an efficient and effective process that is flexible and responsive to change. It helps organizations to develop systematic routines through experience, knowledge and processes that reflect knowledge. Codification of processes is needed when an organization relates to an unfamiliar process. Codification processes imply past experiences.

There are potential benefits that exist in the development of purposes that can be derived from the competencies that evolve within an organization. There is little research on the characteristics of the organizational structure and culture is integrated in the execution of tasks that would determine the effectiveness of the organization.

Reference:

Zollo, M. and Winter, S.. (2007). From Organizational Routines to Dynamic Capabilities. Journal of Management Studies. 99 (07), p2 -31.

Webpage: http://www.google.co.uk/url?sa=t&rct=j&q=organisational%20routines%20and%20capabilities%20pdf&source=web&cd=12&cad=rja&ved=0CDgQFjABOAo&url=http%3A%2F%2Fciteseerx.ist.psu.edu%2Fviewdoc%2Fdownload%3Fdoi%3D10.1.1.194.8168%26rep%3Drep1%26type%3Dpdf&ei=Dak9Ucz-KcLDPNKtgeAP&usg=AFQjCNFgdMP1xHlmcOboQT6V65_o1NR-bA&bvm=bv.43287494,d.ZWU on March 11th 2013

Organizational Capabilities: Some reflections on the concept.

Schienstock, G.

Organisational capabilities are developed in order to stay competitive in a dynamic environment. According to Schienstock, G. (2009), organisations have the expertise which enables them to respond to issues occurring in the organization due to the changes in the environment affecting business practices. Organisational change is a continuous and an open ended process of a company’s development. This is what organizational capability refers to. However, there are complexities faced by organizations and core capabilities of firms help them to remain competent.

The purpose of this research is to support the stance that firms need to develop capabilities to deal with social problems and cannot only focus on their technical capabilities. Moreover, based on knowledge process there have been attempts made to develop concept of organizational capabilities. In addition, options of organizational entrenchment of the knowledge-based capabilities have been highlighted. It has been argued by Schienstock, G. (2009) that organizational capabilities are of utmost importance for some firms. And economic success is dependent on firm’s organizational capabilities. Improvements on this give rise to innovation. Nonetheless paying attention on the distribution of finest practice will barely produce rewarding results. Instead, public innovation policy must take into account the diversity of firms and their specific needs.

The customary organizational research based on a structural approach symbolizes a static perspective. Fixed structural arrangements have been put into practice to supply long-term goal. However, due to the fact that together with the globalization of the economy, the organizational environment becomes more and more intricate and dynamic companies are constantly encountered with new troubles. Such a condition necessitates a new organizational regeneration approach. Organizations can no longer plan at attaining long-term organizational solutions by setting up certain organizational structures in a top-down style. Instead, they need to focus on the formation and constant progress of firm specific organizational capabilities that facilitate them to manage organizational problems in a much more responsive way.

On the other hand, the appliance of the notion of organizational capabilities is not undisputed in experimental research as stated by Schienstock, G. (2009). In the research it has been stated that there are other associated ideas that are not prominently and vividly eminent from the concept of capability. For instance, core competencies or organizational capacities. Moreover, the vast number of organizational capabilities or core competencies mentioned in the research specifies that scholars have not been able to vividly itemize many common organizational problems companies have to deal with and for which they have to come up with dynamic capabilities. It has been questionable, whether it is possible to recognize general problem solving capabilities independent of the explicit problems, which do not lack substance.

Key findings of this research include knowledge process that is required in the development of routine, learning through experiences that enable organizations to make better decisions and lastly, the organizational capabilities, which allows them to respond to the dynamic environment.

Reference:

Schienstock, G.. (2009). Organizational Capabilities: Some reflections on the concept . Journal of Management Studies. . (.), p1- 21.

Webpage: http://www.iareg.org/fileadmin/iareg/media/papers/WP_IAREG_1.2c.pdf on March 11th 2013

CREATING ORGANISATIONAL CAPABILITIES: LEARNING BY DOING.

Goldstein, D. & Hilliard, R

Organizational capabilities have been studied, researched and analyzed in a broad spectrum over a diverse setting. There has been a thorough empirical and theoretical research pertaining to organizational structures and capabilities. However, Goldstein, D. & Hilliard, R. (2004) states that the degree or extent to which experience and activity contributes towards capabilities largely remains unidentified or unexplored. Firms or organizations can catalog various types and forms of capabilities such as managerial and technological, by carrying an in-depth research as well as by proposing hypothesis for various situations. Organizational capabilities are defined as a firm’s aptitude, competence or ability to arrange or employ given resources in a proficient manner beneficial for the organization or firm.

However the question that arises is, from where does this ability come from? The answer to which can be derived from Loasby’s proclamation that is, capabilities are the by-products of previous activities. Additionally, the repeated behavior patterns within an organization give birth to the various types of capabilities, which are essential for the firm as stated by Goldstein, D. & Hilliard, R. (2004). Much of the empirical investigation and research literature pertaining to organizational capabilities has encountered the problem or issue of tautology, i.e. the difficulty or impediment that occurs in measuring capabilities independent of the result or outcome they yield. Capabilities tend to help and are beneficial for the firm as long as long as they help build routines in an organization. Moreover, different firms have different styles or types of capabilities for organizational learning.

Organizations change their pattern of behavior, decision-making strategies and perspectives by changing or transforming their routines. In this case, dynamic capabilities are essential for the well functioning of the organization. It is defined as an organization’s eligibility to acquire new ends, innovation, diversification and expansion considering the existential market stance or position. Static capabilities on the other hand is gathered through experience or acquiring knowledge and understanding of something through learning by enacting or doing that particular thing. In manufacturing, learning can only occur through experience in context of the LBD hypothesis and literature. One of the most vital finding of the LBD literature states that there are many differences and/or discrepancies within firms and organizations regarding the strength and swiftness of organizational learning. There may be distinguished dynamic capabilities in different organizations as well as various processes, which formulate or occur through organizational integration.

According to Goldstein, D. & Hilliard, R. (2004), an organization may experience internal integration through expedient management and planning. In this case, each year’s overall performance is evaluated through variance analysis and other identical strategies with the help of the two components mentioned above that is, planning and management. Each firm or organization needs to learn, develop and construct new capabilities over time in order to ensure a smoother functioning of the organization. Also they must be able to set and implement such routines for the firm, which would boost the proficiency and efficiency rate/level of the organization. Furthermore these routines and capabilities must be empirically investigated or verified through extensive organizational research in order to identify the best and most beneficial ones which could then be implemented in the organization in the foreseeable future.

References:

Goldstein, D. & Hilliard, R. . (2004). CREATING ORGANISATIONAL CAPABILITIES: LEARNING BY DOING. Journal of Management Studies. . (.), p304- 318.

Webpage: http://www2.warwick.ac.uk/fac/soc/wbs/conf/olkc/archive/olkc2/papers/goldstein_and_hilliard.pdf on March 10th 2013

Topics:

Micro-foundations of Routines and Capabilities

Foundations and Micro-foundations of Dynamic Capabilities

Building Micro-foundations for the Routines, Capabilities and Performance Links

Dynamics of Organizational Routines

Journal of Management Studies. 49 (8), p1351- 1369.

Micro-foundations of Routines and Capabilities: Individuals, Processes, and Structure

Felin, T., Foss, N., Heimeriks, K. and Madsen, T.

Routines and capabilities are important part in number of management fields, notably international management, technology strategy and management, and organization studies but at micro-level, the origins of routines and capabilities are not researched properly as per Arrogate and Ingram. "A "micro-foundation" is a set of local-level access and structure through which a social course is caused." (Daniel Little, 2008). From this research we will understand why micro-foundations are very important? And how micro-foundations increase the knowledge from the base as well as tell how components interacts with each other.

The research was carried out by Teppo Felin, Nicolai J. Foss, Koen H. Heimeriks and Tammy L. Madsen. They carried out the research by studying from the basis, i.e. from the micro-level, where they understand how micro-foundations of routines and capabilities can play a vital role in any organization. And then they moved towards the findings of the reasons behind micro-foundation’s analysis in general as well as in scientific terms. And finally they expanded the definition of micro-foundation by segmenting it into three basic categories, i.e. individuals, processes and interactions, structure.

Micro-foundation also affects the development, maintenance and changes in routines and capabilities. The micro foundation of routines and capabilities include components that can be called as base, such as, individuals, processes, structures and interactive effects. As the study on micro-foundation goes on, the researchers established that assumptions about the uniformity is unsustainable and inaccurate and is heterogenic in nature.

While going further, the researchers tried to make common definition about micro-foundations of routines and capabilities. They described routine as repetitive pattern, which is collective phenomenon. And capabilities as a high level routine that when combined with input flows produce output of particular type. The researchers further say that though routines and capabilities are different aspects but they are linked. In case of critically analyzing, the researchers took respondents in the research who were employees and people at managerial level. Also the researchers took them by random sampling and they were near about 1300 auto-manufacturing employees. They took them because their research was dependent on the micro-level study of routines and capabilities. For this they need to study people who were working in a firm, and observe them (their behavior and characteristics) as in a group as well as an individual, furthermore researchers also observe the cognitive and dynamic capabilities of the managers in different routines.

By doing their research on individual’s behavior, characteristics, psychological aspects, also on their interactions and their way of doing work shows that the outcome will be different if the observation is taken from one person to other. The proof for the difference in the result is that the researchers marked that individuals have different belief, goals, interests and different human capital.

Since the research was purely on the micro-foundation of routines and ability, and also the researchers were unable to provide answers to some of the important research questions. The researchers show some biasness related the micro-foundation of routines and capabilities as they didn’t show the theoretical and empirical evidences but showed three categories of micro-foundations and their interactions.

From the research paper, we came to know that the key findings are motivation is necessary for the organizational capability, individual’s experience may diverge or change the routines and is a source of stability, and how interaction between two individuals may affect the performance of routine. And also the artifacts may affect the evolution of new routines. And from these key points, the researchers were still unable to provide solutions to some of the important questions like whether they should focus on individuals and aggregation or more simply on historical patterns and evolution. But they came to a conclusion that micro-foundations constituents i.e. individuals, process and interaction and structures are the base of organizational capabilities and routines.

As reported by the findings, we can say that capabilities and routines of an organization depends upon the individual’s behavior and actions as well as some characteristics of the managers. We can say that though the findings help in drawing some conclusion about the micro-foundation of capabilities and routines but they are not sufficient to come to a definite conclusion as some questions were still there in black box and hence the conclusion is not fully justified.

In the end, we can say that the research helped a lot in gaining knowledge as the findings showed proof of how individual’s experience, behavior and actions can change the performance of routine and how the managers can affect the capabilities of an organization. Furthermore the findings showed that there are many aspects, which can help in understanding the micro-level criteria of routines and capabilities. The findings also tells that why a micro-foundations view is required and how it can be informed to work on organizational and competitive heterogeneity.

Reference:

Felin, T, Foss, N, Heimeriks, K and Madsen, T. (2012). Micro-foundations of Routines and Capabilities: Individuals, Processes, and Structure. Journal of Management Studies. 49 (8), p1351- 1369.

Little, D. (2008). Microfoundations of social practices. Available: http://understandingsociety.blogspot.co.uk/2008/05/microfoundations-of-social-practices.html. Last accessed 13th Mar 2013.

Loasby, B. (2002) Knowledge, institutions and evolution in economics, New York, Routledge.

Webpage: http://0-onlinelibrary.wiley.com.unicat.bangor.ac.uk/doi/10.1111/j.1467-6486.2012.01052.x/pdf on March 2nd 2013

Journal of Management Studies. 5 (2), p205- 222.

Foundations and Micro-foundations of Dynamic Capabilities

PELAEZ, V., HOFMANN, R., MELO, M. and AQUINO, D. 

The research tells about how a firm uses its resource for growth and competition. And through its capability with changing environment including obstacles, it tries to compete among other firms and able to make growth in the competitive area. The research is about the discussion on the concepts of interpretation and coordination as intrinsically relational economic activities, in which inter-subjectivity can both confine and potentials the rationality of agent. The main aim of this research is to propose a theoretical-methodological discussion of the evolutionary approach to a firm’s capability, particularly to the analysis of dynamic capabilities (Teece, Pisano and Shuen, 2002). The research was carried out by Victor Pelaez, Ruth Hofmann, Marcelo Melo and Dayani Aquino from the Department of Economics, Federal University of Paraná, Brazil.

The research was carried out by taking cognitive approach and evolutionary approach. In cognitive approach, all perceptions are hypothetical and therefore must be taken as interpretations of an event based on an individual’s knowledge. The evolutionary approach states that a firm’s competitiveness is taken to be a function of its capabilities to integrate and reconfigure its resources to adapt to changes in the environment and that recognition of environment is no longer stable. Furthermore the research was discussing about the theoretical micro-foundations that will help to understand the decision-making process of agents. The research was further divided into three segments of inter-subjectivity involving the methods of co-ordination and interaction of the firms. And in the last, the research was about the discussion on the capacity to assess the firm’s capabilities and to recognize that economics and the economy do not represent a dichotomy between theoretical and empirical realms.

In the research, the researcher selected the respondents through random sampling and the respondents were the employees and managers of the firm which were helpful in decision making processes. Also the research tells about the competency can be achieved if the iterative method is used with the same respondents and decision making will get more enhanced as the presence of limited knowledge about the firm will then get diminished. Which means that the research will be different if it is done in iterative form. Also there will be greater use of theory to gain knowledge and greater be the influence on capability.

There were many authors and scholars who were defining the term "capability" using different concepts, like Loasby (2002) clarifies the term "capability", by linking it to the potential and the limits of human cognition, which for the science of economics has implications for the crucial problem of decision-making by agents with limited conditions for rationality. But the researchers took the concept worked by Nelson and Winter (1982), that capability is associated with the routines, that companies adopt to organize their repertoire of activities and of information processing, showing a form of biased conclusion. From the research, we came to know that dynamic capability is required by the firms to compete in changing environment and to co-operate internally and externally to the resources, also the experience and theory of the individuals may help the firm to be in progress. As knowledge is recognized as a small input, the agents’ limited rationality is presented with subjective elements that make up the image and the expectations of what they believe they can achieve.

In the end, we can say that the findings are correlated with the conclusion, and we get the knowledge that the decision making process depends not on the subjective interpretation of individual but on inter-subjective interpretation of his environment. In other words, this inter-subjectivity allows the ideas to be established for the communication between the subject and object of research

Reference:

PELAEZ, V, HOFMANN, R, MELO, M and AQUINO, D. (2009). Foundations and Micro-foundations of Dynamic Capabilities. Journal of Management Studies. 5 (2), p205- 222.

Teece, D., G. Pisano and A. Shuen (2002) "Dynamic capabilities and strategic management," in

G. Dosi, R. Nelson and S. Winter (eds) The Nature and Dynamics of Organizational

Capabilities, Oxford U.P., Oxford, pp. 334–362

Webpage: https://www.jstage.jst.go.jp/article/eier/5/2/5_2_205/_pdf on March 8th 2013

DRUID Working Paper No. 07-02

Building Micro-foundations for the Routines, Capabilities and Performance Links

Peter Abel and Teppo Felin

The research was done by Peter Abel (Department of Industrial Economics and Strategy Copenhagen Business School), Teppo Felin

(Organizational Leadership and Strategy Marriott School, Brigham Yuong University), and Nicolai Foss (Center for Strategic Management and Globalization

Copenhagen Business School).The research is mainly about why it is important to understand the strategic management at micro-level other than macro-level. As there is no mechanism that work solely upon the macro-level, and routines and capabilities are complicated pattern of individual action and interaction, hence are best understood at micro-level. Also the research tells about how micro-foundation of routines and capabilities can affect the firm’s performance.

The research was carried out in four steps, initially, the researchers modeled the micro-foundation of how routines can be effective in firm’s performance, and then the research is carried on by enclosing the arguments in a traditional production function framework. The research was further studied in modeling production externalities and finally linked routines and capabilities by saying that a firm can be described as holding the capability to conceive a routine to the degree that it can repeatedly internalize such externalities. The researchers for their work on the performance by individual took some people who have certain skills at certain level of motivation. But in the research, they did not mark any specific number of individuals taken. The researchers showed a model of how individuals can affect the firm’s performance along with formulae, which shows that the performance will not be uniform, as it is dependent on individual’s motivated skills and its outcome.

The conclusion, which the research gives, is that, in strategic management research, the capability has seen virtually no attempts to build explicit micro-foundations and hence it is not clear of how macro-level construct will have an effect on firm’s performance. Also, the key finding is that individual’s actions and skills shows an effect on the performance of firm and how micro-foundation can be built and how routines can make their impact on the performance. And we can say that understanding of micro-level foundation is important because capabilities and routines can create their impact on the organization’s performance.

The conclusion provided by the researchers on their findings is not fully justifiable as they were not able to prove some important points like how routines impact performance may be related to which routines are allowed to emerge and focus on prisoners’ dilemma games. Also the researchers were not able to show how routines can contribute in shaping their recognition or importance in a firm and were not able to decide whether routines are emergent or designed entities.

In the end, the research helps us in understanding the importance of micro-foundation rather than macro-foundation of a firm’s performance depending upon its own and its employer’s capabilities and routines. Furthermore, the research shows us the knowledge of the issue of how to make micro-foundations testable and accountable to observed performance and how facts must be briefly raised including individual’s motivational skill and its results.

Reference:

Abel, P, Felin, T and Foss, N. (2007). Building Micro-foundations for the Routines, Capabilities, and Performance Links. Journal of Management Studies. 7 (2), p1- 23.

Dosi, G., R. Nelson and S. Winter (2002) "Introduction: The Nature and Dynamics of Organizational Capabilities," in G. Dosi, R. Nelson and S. Winter (eds) The nature and dynamics of organizational capabilities, Oxford U.P., Oxford, pp. 1–22.

Webpage: http://www3.druid.dk/wp/20070002.pdf on March 13th 2013

Journal of Management Studies. 49 (8), p1484 - 1505.

Dynamics of Organizational Routines: A Generative Model

Pentland, B., Feldman, M., Becker, M. and Liu, P.

The research deals with the organizational routine’s generative model and how the routines change over time. While going through the research, the researchers tried to explain the generative model and explained how this model demonstrate the variation in the pattern of action is necessary and how this model is linked to the dynamic capability. They showed that the generative model links the micro-level actions to the macro-level dynamics of routines. Researchers also explain how "actions" are important to organizational routines. The research was carried out by Brian T. Pentland, Martha S. Feldman, Markus C. Becker and Peng Liu.

The research about the generative model was carried out by exploration of the key concepts and their relationship to the foundation of organizational routines. After this part, the researchers tried to explain the generative model and then showed deep study on the four important processes in the routines. Finally, they gives some implication of how this model will be used in the dynamics of routines. Since the research moves around the generative model, the actions comes into role and are selected by normal distribution method from the set of given actions and are assigned with the costs. As the researchers carried out the research using relevant concepts and formulation, they observed that up to some level the measurement is approximately same and the qualitative parameters were same, but as the calculation goes further, the result was varying and there was large variation in dynamic changes.

From the research, some of the main findings which came forward are that routines are carried out by socio-material ensembles of actants that include artefacts, the difference between processes in steady state and processes contributing to change co-ordinates the difference between operational and dynamic capabilities (Helfat et al., 2007). Also, in organizational routines, path dependence is demonstrated in two ways (Schulz, 2008): within performances, and between performances. Furthermore, some other important key points which are to be noticed are transition matrix is associated to both the analysis of history as causal force and as observable outcome and the conditions can be used to see the likelihood of socio-material ensamble for action, routines form whenever specific array of actions are retained, a little random variation is sufficient to produce continuous drift in the patterns, smaller the value of retention, the faster the learning process will be and the learning curve will be steeper and the model shows that isolating or removing away from the character, quality and features of actors is not only feasible, it is also helpful for understanding routine dynamics. The researchers came to conclusion that routines can be created if the focus is on the actions. Also there is need of actant who can do work, but the researchers explained the phenomenon of routine dynamics by actions and their repetition over time, which also shows some biasness.

As per the researchers, they showed other areas where their research can be useful, like the inclusion of various options to the choice set (e.g., an action enabled by a new technology). Intuitively, new substitutes create opportunities for new tracks.

Summarizing the whole research, the research provides the knowledge that model suggests that examining the connection between explanations of stability and change based on patterns of action or practices and those established on disposition may help to understand the dynamics of routines and the pattern of action are important to determine any process. And with the help of model, any person can make moves like those made by economists.