Organizational Capabilities: Some reflections on the concept

Firms increasingly operate in a dynamic environment. To stay competitive in such an environment firms have to develop organizational capabilities and know-how that enables them to deal with core organizational problems. The concept of organizational capabilities understands organizational change as a continuous and open-ended process of organizational development. However, the concept is still very vague; there is little agreement on the few core organizational capabilities that firms have to develop to stay competitive. This paper argues that firms cannot focus on technical capabilities only; they also have to develop capabilities to deal with social problems. Furthermore, an attempt is made to develop a concept of organizational capabilities based on the knowledge process within firms. Also, options of organizational embedding of the knowledge-based capabilities are discussed. It is argued, however, that for various firms different organizational capabilities become crucial. The fact that economic success depends on firms’ organizational capabilities makes their improvement a legitimate object of innovation policy. Nevertheless focusing on the distribution of best practice will hardly produce satisfying results; instead, public innovation policy has to take into account the diversity of firms and their specific needs.