Knowledge to Create Dynamic Capabilities

Topics: Management, Strategic management, Knowledge management Pages: 7 (1752 words) Published: July 8, 2013
Discussion Paper I

“Knowledge as a Mechanism to Create Dynamic Capabilities towards Long-Term Competitive Advantages”

Submitted to

Dr. Jittima Tongurai


Mr. Sanchai Kiatsongchai
Student ID: 5411731011

This paper is submitted as partial fulfillment of
National Institute of Development Administration (NIDA)
Knowledge as a Mechanism to Create Dynamic Capabilities towards Long-Term Competitive Advantages
Among complex and inconsistent external environment (Zahra, Sapienza, & Davidsson, 2006); especially, in an open economy with rapid change in innovation, globally diffuse sources of invention, innovation, manufacturing capability (Teece, 2007), and market dynamism (Eisenhardt & Martin, 2000), firms hardly rely on their resources to drive through sustainable competitive advantages. Firms within these fluctuations will need to integrate, build, manipulate and reconfigure internal and external competences to tackle these unsteady environments, termed as ‘dynamic capabilities’ (Teece et al., 1997; Eisenhardt & Martin, 2000; and Ng, 2007). The dilemma provokes that what factors affecting firms’ competency in creating dynamic capabilities to sustain their competitive advantages to respond to market dynamism.

As discussed by Eisenhardt and Martin (2000), dynamic capabilities are not themselves sources of sustained competitive advantages, it’s rather the ability to use dynamic capabilities sooner, smarter or more effectively than competitors. Moreover, Ng (2007) asserted that strength of dynamic capabilities depends on the ability of organisation to discover new resource combinations and uses through gathering valuable information to apply with its ‘prior knowledge’ accumulated through its path dependencies. This implies that the ability of organisations to manipulate and adapt their existing resources or new external resources in creating dynamic capabilities heavily relies on the knowledge derived from learning process within. This view is supported by Grant (1996) that organisational capabilities are the result from knowledge integration to team-based productive activities exemplified by Chrysler’s automobile design process and Shell’s deep-sea oil exploration. As a result, it could be concluded that organisational capability relates to competitive advantages which firms need to assess and integrate their staff’s specialised knowledge. Consequently, this paper will discuss of what factors create knowledge that particular firms will utilise to generate innovation and creativity which, finally, form dynamic capabilities.

Growing of knowledge of the firm requires learning process from both internally e.g. reorganising, accidents, experiments; and externally e.g. acquisitions, joint ventures or new staff (Grant, 1996). With the help of top management to critically identify what knowledge is essential for firm success, thus creating structures in which that knowledge could be protected, and then coordinating the flow of that knowledge across functions (Holbrook, Cohen, Hounshell, & Klepper, 2000). This concept is emphasised by Eisenhardt and Martin (2000) addressing that the evolution of dynamic capabilities occur along a unique path of any particular firm which is shaped by learning mechanisms; for example, repeated practice, small losses, crises and pace experience (e.g. Argote, 1999; Sitkin, 1992; Kim, 1228 and Hayward, 2000).

Innovation and creativity, yielded from learning process, are considered to be other crucial elements comprising dynamic capabilities as they help firms reconfigure their resources (Zahra, Sapienza, & Davidsson, 2006) within to respond to dynamic market and environments. Organisations which execute more innovations will yield more profits distinctively in terms of return on equity (Sharfman & Dean, 1997). Supported by...

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