Dynamic Capabilities as Macro and Micro Organizational Evolution

a conceptual approach embedded in the context of a resource based perspective, is rapidly emerging as a primary model of competitive advantage that is explicitly focused on conditions of environmental change (Eisenhardt & Martin, 2000). Teece et al., 1997:510) originally defined the dynamic capabilities approach as ways of " exploiting existing internal and external firm specific competences to address changing environments. " The " dynamic " aspect of the model concerns firms' ability to modify and revise their competencies in order to achieve a better fit with an ever changing environment, while the " capabilities " component addresses changing internal and external organizational skills, resources, and functional competencies to better match the external environment. Stressing the creation of competitive advantage through the use of processes (organizational and management), positions (firm assets of all types), and paths (beliefs and habits that constrain future behavior) to develop high performance routines over the long run, Teece et al. (1997) characterize dynamic capabilities as " trajectories of competence development. " Thus, according to this framework dynamic capabilities combine flexibility, which enable firms to change, with constraints, which derive from these firms' histories. Therefore, an important theoretical question for advancing research in the area is how firms balance learning from the past with the need to respond to change in evolving their dynamic capabilities.