Dynamic capabilities in international expansion

https://doi.org/10.1016/S1090-9516(00)00043-2Get rights and content

Abstract

This article articulates a dynamic capability perspective on international business. The three essential ingredients of dynamic capability—capability possession (distinctive resources), capability deployment (resource allocation), and capability upgrading (dynamic learning)—have become increasingly fundamental to international expansion and global operations. Capability possession is critical to gaining competitive advantages and determining firm-level strategies to exploit such advantages. Capability deployment is crucial to mitigating the disadvantages of foreignness and preempting emerging opportunities. Capability upgrading is essential to the evolutionary development of sustainable advantages and creating new bundles of resources. Each of these capabilities is a necessary condition for sustained success in today’s world economy characterized by increasing technological advancement and business globalization.

Section snippets

Dynamic capability: concepts and importance

Capability possession (i.e., having distinctive resources), capability deployment (i.e., allocating distinctive resources), and capability upgrading (i.e., dynamic learning and building new capability) are three critical components of dynamic capability. Broadly, distinctive resources are critical assets, knowledge, or capabilities that are firm specific, difficult to imitate, and can generate economic return and competitive edge in the market. The essence of a firm lies in its ability to

Capability possession

Capability possession concerns a firm’s established distinctive resources, including critical assets, knowledge, or capabilities that are firm-specific, difficult to imitate, and can generate economic returns and a competitive advantage. These resources are organizationally embedded. Only critical firm-specific resources can create a sustained competitive advantage and explain performance differences compared to major rivals. For instance, Coca-Cola’s vast number of bottling facilities

Capability deployment

The competitive advantages of firms in today’s economy stem not merely from distinctive resources but also from the manner in which they are deployed (Teece, 1998). To optimally deploy knowledge assets, it is necessary for firms to know what contingencies may affect the efficiency of such deployment. Resources will generate stronger competitive advantages when they are applied through an appropriate configuration with external and internal dynamics in a competitive environment (Wernerfelt, 1984)

Capability upgrading

a Transferring critical capability across borders does not remove the need for firms to create new knowledge and capabilities in geographically dispersed settings. The success of a global business depends not merely on possessing and deploying capabilities but also on learning and acquiring new knowledge. Building, diffusing, and transferring learning capabilities are all processes vital to the growth of MNEs. “Learning capability” is the capacity to generate and generalize ideas and to acquire

Conclusion

This article addresses the notion that the success of a global business depends not merely on its return-generating resources but also on its ability to deploy and upgrade critical capabilities. The importance of deploying and upgrading capabilities is accentuated in today’s world economy characterized by increasing technological advancement and business globalization. A contingency perspective on capability deployment and upgrading is also needed. MNEs should allocate and upgrade capabilities

References (27)

  • D Lei et al.

    Dynamic core competencies through meta-learning and strategic context

    Journal of Management

    (1996)
  • D Teece

    Toward an economic theory of the multiproduct firm

    Journal of Economic Behavior and Organization

    (1982)
  • Bartlett, C. A., & Ghoshal, S. (1987). Managing across borders: New strategic requirements. Sloan Management Review,...
  • J Birkinshaw et al.

    Building firm-specific advantages in multinational corporationsThe role of subsidiary initiative

    Strategic Management Journal

    (1998)
  • J Dunning

    International production and the multinational enterprise

    (1981)
  • J Dunning

    The eclectic paradigm of international productionA restatement

    Journal of International Business Studies

    (1988)
  • J.M Geringer et al.

    Diversification strategy and internationalizationImplications for MNE performance

    Strategic Management Journal

    (1989)
  • G Hamel

    Competition for competence and inter-partner learning within international strategic alliances

    Strategic Management Journal

    (1991)
  • J.F Hennart

    A theory of multinational enterprise

    (1982)
  • M.A Hitt et al.

    International diversificationEffects on innovation and firm performance

    Academy of Management Journal

    (1997)
  • S.H Hymer

    The international operations of national firmsA study of direct investment

    (1976)
  • J Johanson et al.

    The internationalization process of the firmA model of knowledge development and increasing foreign market commitment

    Journal of International Business Studies

    (1977)
  • B Kogut et al.

    Knowledge of the firm, combinative capabilities, and the replication of technology

    Organization Science

    (1992)
  • Cited by (340)

    View all citing articles on Scopus
    View full text