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Introduction
First published online August 1, 2008

Organizational Capabilities, Patterns of Knowledge Accumulation and Governance Structures in Business Firms: An Introduction

Giovanni Dosi, Marco Faillo, and Luigi MarengoView all authors and affiliations
Volume 29, Issue 8-9
https://doi.org/10.1177/0170840608094775

Abstract

The capability-based view of the firm is based on the assumption that firms know how to do things. Assuming the existence of a thing called `organizational knowledge', in the first part of the paper we identify its main building blocks and we provide a description of its inner structure. This results in an analysis of the relationships among key concepts like organizational routines, organizational competencies and skills. In the second part, we consider some empirical implications of the adoption of a capability-based view of the firm in dealing with issues like horizontal and vertical boundaries of the firm, innovation and corporate performance. Some implications for strategic management are also discussed.

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1.
We acknowledge financial support from the European Commission 6th FP(Contract CIT3-CT-2005-513396), Project: DIME (Dynamics of Institutions and Markets in Europe).
2.
Comments by the participants at the Saint-Gobain Centre for Economic Studies Conference on `Organizational innovation within firms' (Paris, 7—8 November 2002), and, in particular, by Masahiko Aoki, Jean-Luis Beffa, Xavier Ragot and Keith Pavitt, are gratefully acknowledged. We would like to dedicate this work to the memory of our friend and mentor, Keith Pavitt, whom we met for the last time at that conference. This work draws upon Dosi et al. (2000), the introduction to Dosi et al.(2000) and Dosi et al. (2003).
3.
1 This section largely builds on the introduction to Dosi et al.(2000).
4.
2 For a review of the literature on organizational routines, see Becker (2004); a few contributions to the analysis of routines can be found in the Special Section on this topic in Industrial and Corporate Change 14/5, 2005.
5.
3 With regard to the contribution of Penrose's work to the resource-based view of strategic management, see Kor and Mahoney (2004) and Pitelis (2002).
6.
The capability/competency-based view of the firm overlaps greatly with the resource-based view: see Barney (1991, 2001); a few of the contributions in Montgomery (1995), and Foss and Mahnke (2000). Part of the difference rests in the terminology. However, terminology as such is not void of importance: a `resource-centred' language risks conveying a `reified' view of capabilities as `object-like' entities, while — we hope — the explicit capability/competency language makes it easier to conserve the underlying process story. Capabilities are not `things' but `ways of doing', collective fuzzy algorithms, properties of collective knowledge essentially revealed through its implementation.
7.
A critique of Barney's (1991) version of the resource-based view and a comparison with the evolutionary (and capability/competency-based) approach are provided by Bromiley and Fleming (2002).
8.
For an inquiry into the behavioural roots of the two approaches, see also Pierce et al. (2002) and Rumelt (1995).
9.
4 See, for example, Coriat (2000) and Florida and Kenney (2000).
10.
5 In the literature, some exploratory attempts have been made to identify `bottom-up' the seemingly viable combinatorics among multiple, interrelated organizational traits: on automobile manufacturing, see McCarthy et al. (1997).
11.
6 The paper by Padgett et al. (2003) contributes to the analysis of the co-evolution of products and firms, that is, how a firm's skills are influenced by the flow of products. Using a chemistry analogy, the authors conceive of the firm as an organism that contains products, which, like chemicals, are transformed by skills, which, like reactions, are rules that transform products into other products. Trade, like food, allows for the passage of transformed products among firms. The composition of a firm's skills evolves through learning by doing; thus, the more a skill is used, the more it is reinforced. The question the paper seeks to answer is how a coherent and self-organized transformation network can emerge from randomly distributed skills across firms. The models developed are based on the chemistry concept of hyper-cycles.
12.
7 See, among others, Rumelt 1991; Davis et al. 1996; Baldwin 1995; Haltiwanger 2000; Nelson 1991; Dosi 1988; Bartelsman and Doms 2000; Foster et al. 2001; Noda and Collis 2001.
13.
8 The latter `fat-tailedness' property is confirmed also by different pieces of evidence from the Italian industry: the autocorrelation in growth dynamics is not, however (Bottazzi et al. 2002; Bottazzi and Secchi 2003.).
14.
9 For a broader discussion of the recent emphasis on capabilities in the strategic management literature, see Rumelt et al. (1991), Teece et al. (1997) and Stalk et al. (1992). The discussion in Robert Grant's excellent textbook illustrates the appearance of these ideas in the business school curriculum (Grant 1996, Ch 5).
15.
10 On organizational aspiration levels, see Massini et al. (2002).

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Published In

Volume 29, Issue 8-9
Pages: 1165 - 1185
Article first published online: August 1, 2008
Issue published: August 2008

Keywords

  1. capabilities
  2. routines
  3. organizational knowledge
  4. problem solving

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Giovanni Dosi
LEM, Sant'Anna School of Advanced Studies, Pisa, Italy, [email protected]
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Marco Faillo
University of Trento, Italy, [email protected]
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Luigi Marengo
LEM, Sant'Anna School of Advanced Studies, Pisa, Italy, [email protected]
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