Dynamic Capabilities and Economic Relations

The dynamic capabilities approach to a firm’s organisation and behaviour is attracting a growing number of studies and applications, now evident in economics and business literature. Starting from the main features of the consequent debate, this paper analyses the theoretical foundations of dynamic capabilities and their relevance to a firm’s internal structure and external relations. The paper contextualises the concept of dynamic capabilities into specific economic environments, in order to reduce the indeterminacy of their implications. An empirical application to a sample of firms operating in “flexible specialisation” manufacturing highlights the potential of this approach for understanding the behaviour of enterprises and their performance. 1. The dynamic capabilities of firms Much intellectual energy was expended in the second half of the last century in developing theoretical models for business activity. Scholars have undertaken the task from different perspectives, producing a variety of theoretical approaches. The dynamic capabilities approach is still under development but has already achieved some convergence between business economics and some more general “nonorthodox” approaches in economics. In particular, in order to explain the competitiveness of a firm, a theory based on this approach combines a strategic view of management, the organisational characteristics of the firm, its role in acquiring and organising knowledge and its endogenous ability to follow specific paths to restructure itself. As a consequence, it combines a managerial view of strategy with a “far from equilibrium” perspective on the economic situation where the main initiative for action lies with the firm. The dynamic capabilities approach aims to establish a theoretical interface with innovation theory, with models of organisation and with resource-based and market process models to explain «sources and methods of wealth creation and capture by private enterprise firms operating in environments of rapid technological change» (Teece et al., 1997). Teece et al. (1997) see the competitive advantage of firms as resting on distinct processes, shaped by the firms’ asset positions (including knowledge), and the evolutionary path adopted or inherited. Contrary to “property rights” and “transaction costs” theories, the firm is therefore viewed from a production standpoint. However, out of keeping with tradition, this approach includes non-material and organisational assets in the initiation of structural change. Therefore the focus is on managerial activities oriented to identifying new opportunities and organising their exploitation. Our aim is to investigate the theoretical foundations of such a model and to use it to analyse the current evolution of business activity in a mature environment. Therefore, in Section 1 we will first identify the elements which have made the adoption of this