Building and Leveraging Dynamic Capabilities: Insights from Accelerated Innovation in China

• Date: 01 August 2016
• Published date: 01 August 2016
• DOI: http://doi.org/10.1002/gsj.1124

BUILDING AND LEVERAGING DYNAMIC CAPABILITIES:

INSIGHTSFROMACCELERATEDINNOVATIONINCHINA

PETER J. WILLIAMSON

*

Cambridge Judge Business School, University of Cambridge, Cambridge, U.K.

Plain language summary: This article explores what we can learn from a set of Chinese

companies who have successfully pursued a strategy of accelerated innovation about

building and leveraging dynamic capabilities. We conclude that creating flexible organi-

zational structures and processes is key. The resulting dynamic capabilities can help

achieve sustainable competitive advantage by spawning a series of innovations that en-

able a company to ‘run faster’than competitors. These capabilities depend, in part, on

the perceptions and behaviors of the firm’s staff. Almostwithout exception, however, they

have their rootsin characteristics of thelocal environment. Suchdynamic capabilities will

be difficult to transfer and deploy overseas. A firm’s ability to sustain competitive advan-

tage abroad, therefore, depends on choosing foreign markets that share similarities with

the firm’s home base.

Technical summary: The dynamic capabilitiesframework was developed in the context of

markets characterized by rapid technological change. Globalization means that firms in

many industries now need similar capabilities to achieve and sustain competitive advan-

tage. But the nature of these capabilities, their antecedents, and how they can underpin

sustainable competitive advantage are incompletely understood. This article draws on a

set of case studies of successful Chinese innovators to examine these questions. The

dynamic capabilities we observe areunderpinned by a set of processesthat are themselves

dynamic and flexible, rather than fixed, repeatableroutines. Their antecedents mostly lie

in qualities of the local environment. Hence, they tend to be context dependent, with

consequent limitations in their transferability and applicability to sustaining competitive

advantage in foreign markets. Copyright © 2016Strategic Management Society.

INTRODUCTION

The Dynamic Capabilities framework was introduced

by Teece, Pisano, and Shuen (1997) with the aim of

better understanding how firms achieve and sustain

competitive advantage in environments of rapid

technological change (Teece et al., 1997: 509). The

concept has subsequently been developedand refined,

leading to a definitionof dynamic capabilities as those

capabilitiesthat ‘enable the firm to integrate,build and

reconfigureinternal and external resourcesto maintain

leadership in continually shifting business environ-

ments’(Teece, 2014a: 329). This distinguishes

dynamic capabilities from capabilities that enable the

firm to achieve technical efficiency at any point in

time (which Teece, 2014a, terms ‘ordinary capabili-

ties’). Dynamiccapabilities, it is argued, enablea firm

to deliver sustained, superior performance over the

long term by givingit the capacity to continually adapt

and innovate. The ownership of valuable, rare, imper-

fectly imitable, and non-substitutable (VRIN)

resources (Barney, 1991) combined with effective

strategies for their deployment, therefore, may allow

a firm to achieve competitive advantage at a point in

Keywords: dynamic capabilities;China; innovation; change

*Correspondence to: Peter J. Williamson, Cambridge Judge

Business School, University of Cambridge, Trumpington St.,

CambridgeCB2 1AG, U.K. E-mail: p.williamson@jbs.cam.ac.uk

Global Strategy Journal

Global StrategyJournal, 6:197–210 (2016)

Published onlinein Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/gsj.1124

Copyright © 2016 Strategic Management Society