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      The Limitations of Dynamic Capabilities
      02 Oct 2019Working Paper Summaries

      The Limitations of Dynamic Capabilities

      by David J. Collis and Bharat Anand
      This paper explains the role dynamic capabilities play in competitive advantage, identifies the conditions that make them valuable by establishing their relationship to resources and market positioning, and describes two types and various levels of the phenomenon. Developing such capabilities is desirable, but there are limitations to their effectiveness.
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      Author Abstract

      The concept of dynamic capabilities draws its theoretical basis from two classic traditions within the strategy field—the resource-based view of the firm (RBV) (Wernerfelt, 1984) and market positioning (Porter, 1996). A dynamic capability qualifies as a source of sustained heterogeneous firm performance within the RBV framework because it arises from embedded organizational routines that accumulate in a path dependent process—the “stock” explanation of durable advantage (Barney, 1991). Because such a dynamic capability allows a firm to continually reposition itself in product market space, it satisfies the “flow” explanation of current competitive advantage by ensuring that the firm always maintains a wider gap between willingness to pay and cost than competitors (Brandenburger and Stuart, 1996). Indeed, dynamic capabilities seem to give rise to the enviable ability to “always have a competitive advantage in an attractive industry” and so continually deliver superior financial performance regardless of external circumstances.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: September 2019
      • HBS Working Paper Number: HBS Working Paper #20-029
      • Faculty Unit(s): Strategy
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      Bharat N. Anand
      Bharat N. Anand
      Henry R. Byers Professor of Business Administration
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      David J. Collis
      David J. Collis
      Adjunct Professor
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