When do Dynamic Capabilities Lead to Competitive Advantage? The Importance of Strategic Fit

• Published date: 01 June 2019
• DOI: http://doi.org/10.1111/joms.12415
• Author: Amir Pezeshkan,Lucas Wenger,Stav Fainshmidt,Mark R. Mallon
• Date: 01 June 2019

© 2018 Society for the Adv ancement of Managment St udies and John Wiley & Son s Ltd

When do Dynamic Capabilities Lead to Competitive

Advantage? The Importance of Strategic Fit

Stav Fainshmidta, Lucas Wengera, Amir Pezeshkanb and

Mark R. Mallonc

aFlorida International University; bUniversity of Baltim ore; cElon University

ABST RACT Recent studies suggest t he relat ionship bet ween dynamic capabilities and compet i-

tive advantage m ay be jointly a ffected by organizational a nd envi ronmental factors. We enrich

this nascent per spective by developing a configu rational theoretical framework – under pinned

by the mechanism of st rategic fit – wherein dynamic c apabilities lead to a competitive advan-

tage when they support a st rategic orientation appropriate for the levels of dynam ism and

munificence i n the environment. Results of a fuzzy-s et Qual itative Comparative Analys is

using prima ry data show that dynamic capabi lities lead to a competitive advantage in d y-

namic, munif icent environments by enabling the combinat ion of differentiation and low-cost

orientations. In sta ble, non-munif icent environments, dynamic capabi lities are effective in

support of a low-cost orientation. T he centra l insight of this study is that the re lationship

between dynam ic capabilities and competitive advanta ge is contingent upon the strategic f it

between organi zational and environmental factors , contr ibuting to a more r igorous and

config urational dynamic capabil ities view.

Keywo rds: config urational theory, dynamic capabi lities, environmental dyna mism,

environmental mun ificence, fuzzy-set ana lysis, strategic fit, st rategic orientation

INTRODUCTION

The dynamic capabil ities view suggests that the extent to which dy namic capabilities

contribute to competitive advantage depends on the envi ronment in which firms oper-

ate (Schilke, 2014; Winter, 2003). Often, the focus has been on dynamic environments,

because such environments require that firms change more frequently, offering more

opportunities to exercise dy namic capabilities and recuperate the costs of developing

Journal of Man agement Studi es 56:4 June 2019

do i: 10 .1111/jo ms. 12415

Address for re prints: St av Fainshmidt, Depa rtment of Internat ional Business, Col lege of Business, Flor ida

Internationa l University, Miami, F L 33174, USA (sfainshm@f iu.edu).

Dynamic Capabil ities and Competitive Advantage? 759

© 2018 Society for the Adv ancement of Managment St udies and John Wiley & Son s Ltd

them (Drnevich a nd Kriauciunas, 2011; Wilden and Gudergan, 2015). However, several

conceptual and empirical contr ibutions suggest that the relationship between dy namic

capabilities and competitive advantage is more complex, and that focusing on environ-

mental dynamism without attention to other relevant factors may paint an incomplete

portrait of the value of dyna mic capabilities (Fainshmidt et al., 2016; Grant and Bakhru,

2016; Peteraf et al., 2013; Ringov, 2017).

Accordingly, Wilden et al. (2016) propose an ‘architectural model’ whereby ‘the effects

of DCs [dynamic capabilities] on performance need to be investigated using a configura-

tional mindset, that is, including both internal and external contextual factors’ (p. 1001).

As a literature review, Wilden et al. (2016) provide the foundation for a configurational

theory and call for more studies identifying the configurations of environmental and

organizational factors that render dynamic capabilities conducive to competitive advan-

tage. However, a meaningful configurational theory of dynamic capabilities can only

develop if we flesh out the configurations that are effective and explicate the underlying

theoretical mechanisms. In this paper, we take a step in that direction by developing a

configurational theoretical framework predicting combinations of dynamic capabilities,

environmental factors, and organizational factors that lead to competitive advantage,

underpinned by the concept of strategic fit (Ginsberg and Venkatraman, 1985; Zajac

et al., 2000).

Specifically, alongside dynamism, we introduce environmental munificence as an en-

vironmental factor shaping access to resources and thus the potential value of dynamic

capabilities in supporting alignment with the external environment (Aragon-Correa and

Sharma, 2003; Zott, 2003). In terms of internal factors, we draw from multiple works

arguing that the firm’s strategic orientation may steer dynamic capabilities in producing

resource configurations (e.g., Bingham and Eisenhardt, 2008; Wang and Ahmed, 2007;

Wilden et al., 2016). Indeed, Wilden et al. (2016, p. 1032) argue that a more complete

model of the value of dynamic capabilities ought to consider the firm’s strategic orien-

tation, as it ‘comprises the long-term managerial plans that are put in place to adapt

to internal and external changes’. We argue that if firms’ strategic orientation affects

their ability to obtain a competitive advantage by aligning operational capabilities with

environmental conditions, then dynamic capabilities may either strengthen such fit or

generate change that weakens fit. Accordingly, we put forth several hypotheses predicting

specific configurations of dynamic capabilities, environment, and strategic orientation

associated with competitive advantage.

To test our configurational theoretical framework, we utilize fuzzy-set Qualitative

Comparative Analysis (fsQCA), a configurational technique rooted in set theory and

Boolean algebra (Fiss, 2011), and a primary dataset of 162 Israeli firms. Results suggest

that dynamic capabilities are associated with competitive advantage in dynamic, munif-

icent settings, and may enable the effective combination of differentiation and low-cost

orientations in such environments. Additionally, dynamic capabilities are associated with

competitive advantage in stable, non-munificent environments for firms with a low-cost

orientation. In stable, munificent environments, firms can achieve a competitive advan-

tage with or without dynamic capabilities by employing an effective strategic orientation.

Finally, in dynamic, non-munificent (resource-scarce) environments – arguably the most