Strategic Renewal in Large Multiunit Firms: Four Dynamic Mechanisms

An organization needs specific capabilities to develop competencies, but at the same time remaining open for expanded search. These paradoxical requirements imply that there are balances to be struck if capabilities and resources are to remain vital. How do firms then maintain, yet renew or replace their distinctive competencies? Notwithstanding the managerial relevance of this provocative question, most of the research endeavours in strategic management are rooted in stability, not change. There has been relatively little focus on the specifics of how multiunit firms first develop firm-specific competencies and how they renew them to shifts in the industry. This paper proposes a dynamic approach to understanding and investigating the managerial capabilities and organizational resources that are likely to enable a firm to renew, augment, and adapt its core competence over time. We identify four mechanisms which help describe the complex paths of evolution and adaptation of firm-level distinctive competencies to resolve the paradox of stability and renewal. These are labelled: selection, hierarchy, time, and network. We show how they are embedded in the ideas of population ecology, organizational economics, administrative theory, corporate entrepreneurship, innovation theories and interorganizational relations. By reference to previous studies, we suggest that survival requires usage of at least one, and often more, of these mechanisms. Descriptors: strategic renewal, organizational change, core competencies, capabilities