Tuesday, 23 August 2011

Dynamic capability and multinational corporations

Dynamic capability theory appears to be based  on the resource based view in the strategic management literature (re: http://en.wikipedia.org/wiki/Resource-based_view) and has some additional notions on top of the core competence model (re: http://en.wikipedia.org/wiki/Core_competency). As such, this model is a kind of inside-out approach in strategic analysis as contrasted with the outside-in stance in  Porter's school of strategic thinking. Such kind of theory is considered more useful to analyze a business in a highly turbulent business environment.

I have the impression that, the additional notions as compared with the core competence model are related to the concern of "dynamic" in dynamica capability thinking. It is dynamic because it pays attention on how to dynamically manage a company's capability to make it more viable in a dynamic external environment. The basic model that I could discern from the literature is depicted in the following diagram:



The dynamic capability model discuss how companies should manage its managerial and organizational processes to nurture its dyamic capability so as to achieve evolutionary fitness; and subsequently, to measure evolutionary fitness.

For multinational corporations, as its resources (including its dynamic capability) are scattered in various countries, the dynamice capability process needs to deal with the concerns of capability transfer, capability integration, and capability sourcing from different countries where specific country-specific assets (e.g. intangible assets) are embedded in them. MNC's dynamic capability processes will,  in turn, affect the external environments in the  host countries where the MNCs have business activities.

References
  1. Dunning, J.H. and Lundan, S.M. (2008) "The Institutional Origins of Dynamic Capabilities in Multinaional Enterprises", Whitepaper. (re: http://eiba2008.ttu.ee/public/Papers/73.pdf)
  2. Helfat, C.E., Finkelstein, S., Michell, W., Peteraf, M.A., Singh, H., Teece, D.J., and Winter, S.G. (2007) Dynamic Capabilities, Blackwell Publishing

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