The microfoundations of an operational capability in digital manufacturing

• Published date: 01 December 2019
• Author: Paul D. Cousins,Samuel Roscoe,Robert Handfield
• Date: 01 December 2019
• DOI: http://doi.org/10.1002/joom.1044

RESEARCH ARTICLE

The microfoundations of an operational capability

in digital manufacturing

Samuel Roscoe

1

| Paul D. Cousins

2

| Robert Handfield

3

1

The University of Sussex Business School,

Falmer, Brighton, UK

2

School of Economics, Finance and

Management, The University of Bristol,

Clifton, Bristol, UK

3

Poole College of Management, North

Carolina State University, Raleigh, North

Carolina

Correspondence

Samuel Roscoe, The University of Sussex

Business School Falmer, Brighton BN1

9SL, UK

Email: s.roscoe@sussex.ac.uk

Present address

Paul D. Cousins, Liverpool University

School of Management, The University of

Liverpool, Chatham St, Liverpool L69 7ZH,

UK

Handling Editors: Jan Holmström, Matthias

Holweg, Benn Lawson, Frits Pil, and

Stephan Wagner

Abstract

This article seeks insights into how individuals, processes, and structures interact

to form the microfoundations of an operational capability in digital manufacturing.

Using a knowledge-based theory lens, we develop an empirical framework that

explains how structures and processes encourage individuals to interact and share

knowledge, and through these interactions, operating routines and operational capa-

bilities emerge. The model is further refined using data collected from 40 interviews,

steering committee meetings and participant observations at a high technology aero-

space company. We find that discrete technologies, used in one component or subas-

sembly, can be developed within authority-based hierarchies using rigid new product

development processes. We also find that whole system technologies that affect mul-

tiple aspects of the final product require flexible processes and consensus-based hier-

archical structures. Consensus-based structures include centers of competence, which

provide individuals the freedom to “learn through failure”and develop flexible ad

hoc problem solving processes. Such flexible processes encourage individuals to

learn from their mistakes and share new knowledge on a repetitive basis, leading to

the emergence of operating routines. The paper contributes to the knowledge-based

view by empirically demonstrating how different types of new technology develop-

ment programs, be they for discrete or whole system technologies, may benefit from

different configurations of flexible/rigid processes and authority-based/consensus-

based structures.

KEYWORDS

3D printing, additive manufacturing, capabilities, digital manufacturing, microfoundations, routines

1|INTRODUCTION

In 2015, additive manufactured goods represented less than 1%

of all products made in the United States (UPS, 2018). Three

years later, Forbes magazine found that additive manufacturing

contributed to just 0.04% of global manufacturing output

(Forbes, 2018). McKinsey and Co. suggests the reason for this

slow uptake is due to companies not having a clear roadmap

on how to develop additive manufacturing within their opera-

tions (McKinsey and Co., 2017). We adopt a knowledge-based

view (KBV) theoretical lens to understand this issue, exploring

how one leading technology firm developed operational

capabilities in the use of additive manufacturing that led to

improved technological performance.

Operational capabilities refer to the repeated and reliable

performance of an activity (Helfat & Winter, 2011) and

represent a firm's intended or realized operational strengths

(Ferdows & De Meyer, 1990; Flynn & Flynn, 2004; Flynn,

Schroeder, & Flynn, 1999). Operational capabilities are

created by developing operating routines, which form the

Received: 19 May 2017 Revised: 18 April 2019 Accepted: 10 May 2019

DOI: 10.1002/joom.1044

774 © 2019 Association for Supply Chain Management, Inc. J Oper Manag. 2019;65:774–793.wileyonlinelibrary.com/journal/joom

basis for these capabilities and subsequently become

established over time (Peng, Schroeder, & Shah, 2008).

The operations management literature has several examples of

how firms have developed operating routines that eventually

form operational capabilities (see Adler, Goldoftas, & Levine,

1999; Anand, Gray, & Siemsen, 2012; Peng et al., 2008).

The focus of our analysis is at the microfoundational

level (Felin, Foss, Heimeriks, & Madsen, 2012) of the firm,

where human interactions constitute the primary source of

knowledge development and knowledge transfer. The notion

of microfoundations stems from the KBV, where knowledge

is positioned as a firm's most valuable resource and indi-

viduals act as the locus of that knowledge (Grant, 1996a;

Nonaka, 1994). The microfoundations of organizational

routines and capabilities refer to the “interaction”effects

that occur between individuals, processes, and structures,

and that lead to the emergence of macro-level outcomes

(Felin et al., 2012 p. 1353). We adopt this theoretical perspec-

tive to answer the following research question: What role do

individuals,structures,and processes play in the development

of an operational capability in additive manufacturing?

In addressing this question, we conducted an in-depth

case study of a high technology aerospace firm, using the

company's additive manufacturing development program as

the unit of analysis. Additive manufacturing's development

provides a rich context to study how individuals, processes,

and structures interact to form operational capabilities. The nov-

elty and unique properties of additive manufacturing require

individuals from diverse backgrounds to work around hierarchi-

cal structural boundaries and form consensus driven cross-

functional teams to enable them to integrate the new technology

development process into the focal firm. This case analysis cre-

ated a unique opportunity to observe how microlevel interac-

tions aggregated into operating routines and led to the

emergence of a macrolevel operational capability in digital

manufacturing. Data were collected using semistructured inter-

views, steering committee meetings, and participant observation;

data were objectively verified using company documentation,

following methods aligned with unobtrusive measures (Webb

et al., 1999). By gathering empirical data to study this phenome-

non, we respond to the call of Felin et al. (2012) to explain the

origins of routines and capabilities by analytically focusing on

three primary microfoundations: (a) individuals, (b) processes

and interactions, and (c) structures.

The remainder of the article is divided into four sections.

In the next section, we use a theory-building approach to

explain how individuals, processes, and structures interact,

and how such interaction leads to the emergence of operat-

ing routines and operational capabilities. Section 3 provides

a justification for the research design, data collection, and

analysis methods. Section 4 presents the findings from the

case. The final section compares the empirical evidence to

the existing literature to arrive at a framework of the micro-

foundations of an operational capability in digital manufactur-

ing. The article concludes by outlining the study's contribution

to theory and managerial practice and proposing potential areas

for future research.

2|LITERATURE REVIEW

The foundations of competitive advantage research are linked

to the idea that the unique information possessed by a firm

(Barney, 1986), combined with the ability to unlock this

information in an efficient and effective manner, are critical to

an organization's growth. Others suggest it may simply be

attributable to luck (i.e., being in the right place at the right

time) (Denrell, Fang, & Winter, 2003; Winter, 2013). The

idea that firms possess superior knowledge or information is

recognized as the aggregate product of individual behaviors,

as information and knowledge is created from an aggregation

of individuals' knowledge and experiences within the firm

(Felin & Hesterly, 2007; Nelson & Winter, 1982).

Traditionally, theories of strategic factor markets (Barney,

1986) and theories of the firm (Williamson, 1981; Williamson,

1987) have focused on the formation of strategy by a single

actor, namely the firm. This level of “macro”analysis offers a

limited explanation of why some firms are better able to suc-

ceed than others. The concept of microfoundations (Felin &

Hesterly, 2007) provides a more granular context for under-

standing how capabilities are formed, how individuals act

within organizations, as well as the specific roles of individuals

in creating organizational capability (Barney & Felin, 2013

p. 149). A microfoundational level of analysis is not only con-

cerned with skills, ability, capability, and knowledge, but also

how the aggregate capability is created, with a particular focus

on organizational design, structure, and process (cf.Barney &

Felin, 2013 ; Felin et al., 2012). Exploring how the constituent

microfoundational elements of organizational design, structure,

and process interact with one another can explain how capabili-

ties are created (Barney & Felin, 2013; Felin et al., 2012).

Research suggests that poorly designed organizations with mis-

aligned structures and siloed processes may lead to unrealized

operational capabilities that remain dormant and may even lead

to an organization's demise (cf. Foss, 2003). Using the KBV,

we next explore how operational capabilities may be created

within the microfoundations context. We are explicitly inter-

ested in responding to scholars (Greve, 2013; Harper & Lewis,

2012) that describe the link between macro (strategic capabil-

ity) and the microfoundational construction of capabilities.

2.1 |Operational capabilities

In the context of the KBV of organizational design, an oper-

ational capability is a broad functional capability that

ROSCOE ET AL.775