DYNAMIC CAPABILITIES MICRO PROCESSES AND MACRO … · • Given some micro level invariant, predict...

||Chair of Technology and Innovation Managementwww.timgroup.ethz.ch

Stefano Brusoni , ETH Zürich

DYNAMIC CAPABILITIES: MICRO-PROCESSES AND MACRO OUTCOMES

CCC Faculty Day 2016, Bocconi University (I)


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?


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 intra-

industry 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)

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Microfoundations of DCs

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‘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


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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 …


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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)

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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)

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Dynamic capabilities

[I] Paths

[II] Positions

[III] Processes

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Which micro-foundations?


[I] Paths

• 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?



[I] Paths

[II] Positions

[III] Processes





[I] Paths

[II] Positions

[III] Processes



[II] Positions

• 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’)



[I] Paths

[II] Positions

[III] Processes





[I] Paths

[II] Positions

[III] Processes



[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



[I] Paths

[II] Positions

[III] Processes



• When there is some form of emergence (e.g. Barley and Felin, 2013)

• Aggregation ‘tensions’ between micro-level ‘paradigms’ and meso/macro-level patterns

When are microfoundations most interesting?



• 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?]

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




• 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)




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


THANK YOU!


• Processes, ways of coordinating and combining

• Positions, portfolio of difficult to trade assets

• Paths, history matters

• Executive functions • E.g. Cog control capabilities, hot

and cold rationality, but also FRAMES

• From traits to profiles• E.g. TCI vs Big 5

• Traits, genetics, stable features• E.g. self monitoring and dormant

ties

NEED GRAPHICAL IDEA FOR THIS ONE


BUILDING BLOCKS OF DCs BUILDING BLOCKS OF MFs


Macro developments

• Excellent at making sense of messy change processes 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)

• Focus beyond boundaries of focal organization• How to create and design complex patterns of interdependencies

across technological and organizational elements

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Troppospazio in

alto poco in basso


• 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.

Notes for spech



What do we aim the drill at?



• 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; Laureiroet 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)

Interesting ‘aggregation’ problems: three tensions



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

DYNAMIC CAPABILITIES MICRO PROCESSES AND MACRO … · • Given some micro level invariant, predict...

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