The Resource-Capability-Competence Perspective in Strategic Management: a Re-Appraisal of the Epistemological & Theoretical Foundations
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THE RESOURCE-CAPABILITY-COMPETENCE PERSPECTIVE IN STRATEGIC MANAGEMENT: A RE-APPRAISAL OF THE EPISTEMOLOGICAL & THEORETICAL FOUNDATIONS by IMAN SEOUDI Submitted in partial fulfillment of the requirements For the degree of Doctor of Philosophy Dissertation Adviser: Dr. Bo Carlsson Department of Economics CASE WESTERN RESERVE UNIVERSITY January 2009 CASE WESTERN RESERVE UNIVERSITY SCHOOL OF GRADUATE STUDIES We hereby approve the dissertation of ________Iman Seoudi____________________________________________ candidate for the _Doctor of Philosophy in Management__________degree *. (signed)___________Prof. Dr. Bo Carlsson____________________________ (chair of the committee) ______Prof. Dr. Susan Helper________________________ ______Prof. Dr. Vasudevan Ramanujam________________ ______Prof. Dr. Matthias Huehn______________________ (date) _____18th November 2008_____________________ *We also certify that written approval has been obtained for any proprietary material contained therein. 2 I dedicate my work to my Creator, I hope to have started this work with sincere and pure intentions, and strive to end it similarly … that God may accept my effort, and look upon me with contentment and mercy, and that others may benefit from any measure of knowledge I have produced. 3 Table of Contents List of tables ……………………………………………………….. ……… 8 List of figures ………………………………………………………………. 9 Acknowledgments …………………………………………………………. 10 List of abbreviations ………………………………………………………. 11 Abstract ……………………………………………………………………. 12 CHAPTER 1: INTRODUCTION………………………………………….. 14 1.1 Introduction …………………………………………………………… 14 1.2 The strategy context: a historical note ………………………………… 16 1.2.1 A story of strategy …………………………………………… 17 1.2.2 The resource-based view, dynamic capabilities & core competences ………………………………………………………. 19 1.3 Aim and scope of the research ………………………………………… 21 1.4 Significance & contribution of the research …………………………… 23 1.5 Overview of the dissertation …………………………………………… 27 CHAPTER 2: EPISTEMOLOGY & METHODOLOGY ………………… 32 2.1 Epistemology …………………………………………………………… 33 2.2 Positivist philosophy of science ………………………………………… 33 2.3 Social constructionist epistemology …………………………………… 44 2.4 The methodology of scientific research programs ……………………… 52 2.4.1 Structure of SRPs ……………………………………………… 53 2.4.2 The dynamics of SRPs: Progressive versus degenerating problem -shifts ………………………………………………………………… 54 4 CHAPTER 3: THE RESOURCES - CAPABILITIES - COMPETENCE PERSPECTIVE……………………………………………………………. 57 3.1 Introduction ……………………………………………………………. 57 3.2 Edith Penrose as the foundation ……………………………………….. 60 3.3 The constructionist epistemology of Edith Penrose …………………… 65 3.4 The rational-equilibrium school ……………………………………….. 71 3.4.1 A conceptual outline of the RBV ……………………………. 72 3.4.2 The underlying framework of the rational-equilibrium school 81 3.5 The behavioral-evolutionary school …………………………………… 91 3.5.1 A conceptual outline of the behavioral-evolutionary school … 92 3.5.2 The underlying framework of the rational-equilibrium school 98 3.6 The social-constructionist school ……………………………………… 102 3.6.1 A conceptual outline of the social constructionist school …… 103 3.6.2 The underlying framework of the social constructionist school 105 3.7 Conclusion ……………………………………………………………… 112 CHAPTER 4: THE DYNAMIC CAPABILITIES RESEARCH PROGRAM 117 4.1 Introduction …………………………………………………………… 117 4.2 The hard core of the DC program ……………………………………... 119 4.2.1 Organizational routines & capabilities ………………………. 119 4.2.2 The concept of dynamic capabilities ………………………… 121 4.2.3 Dynamic capabilities & competitive advantage …………….. 126 4.2.4 Basic assumptions: manager rationality ……………………… 128 4.2.5 Basic assumptions: Epistemology, entrepreneurship and 5 the cognitive dimension …………………………………………… 130 4.2.6 Basic assumptions: Firm and environment ………………….. 137 4.3 Tensions in the DC program …………………………………………… 139 4.3.1 Routinization versus Dynamization …………………………. 140 4.3.2 Efficiency to Effectiveness to Fitness ……………………….. 145 4.3.3 Resolving the Tensions in the DC Concept …………………. 148 4.4 Organizational learning and managerial implications of the DC program 150 4.4.1 Organizational learning ……………………………………… 150 4.4.2 Managerial implications: Uncertainty, complexity & the illusion of control ………………………………………………….. 157 4.5 Conclusion: Dynamic capabilities, economics & strategic management 159 CHAPTER 5: THE COMPETENCE PROGRAM ……………………… 163 5.1 Introduction ……………………………………………………………. 163 5.2 Core Competence …………………………………………………….... 165 5.3 The dynamic dimension ……………………………………………….. 168 5.4 The Systemic dimension ………………………………………………. 174 5.4.1 Organizations as closed systems …………………………….. 174 5.4.2 Logical levels of management ………………………………. 176 5.4.3 Implications for competence management …………………… 179 5.5 The cognitive dimension ………………………………………………. 184 5.6 The holistic dimension ………………………………………………… 191 5.7 The basic assumptions ………………………………………………… 194 5.8 Organizational learning ………………………………………………… 197 6 5.9 Conclusion ……………………………………………………………… 200 CHAPTER 6: A COMPARISON OF DC & COMPETENCE PROGRAMS 202 6.1 Introduction …………………………………………………………… 202 6.2 Epistemology and basic assumptions …………………………………. 202 6.3 Methodology and base disciplines …………………………………….. 205 6.4 Levels of management and fitness criteria …………………………….. 207 6.5 The cognitive dimension ………………………………………………. 208 6.6 Retrospect versus prospect ……………………………………………. 211 6.7 Organizational learning and knowledge ………………………………. 212 6.8 Conclusion …………………………………………………………….. 213 6.9 A brief recap …………………………………………………………… 214 6.10 Contributions ………………………………………………………… 217 6.11 Limitations …………………………………………………………… 220 6.12 Future research ………………………………………………………. 221 CHAPTER 7: AN EMPIRICAL APPLICATION OF THE THEORETICAL FRAMEWORK ……………………………………….. 223 7.1 Introduction …………………………………………………………… 223 7.2 The software services industry in brief ………………………………… 223 7.3 Company A: A resource-based view …………………………………… 224 7.4 Company B: A dynamic re-configuration of capabilities ………………. 228 7.5 Company C: A competence perspective ………………………………. 231 7.6 Conclusion ……………………………………………………………… 234 Bibliography ………………………………………………………………. 236 7 List of Tables Table (1): Elements of Strategic Position …………………………………. 79 Table (2): The three schools of the RCC perspective ……………………… 115 Table (3) Tensions in the DC program ……………………………………… 140 8 List of Figures Figure (1) Activities in the knowledge evolution cycle …………………… 151 Figure (2) Logical levels of management and fitness criteria ……………… 178 Figure (3) A fitness landscape with multiple local optima ………………… 210 Boxes Box (1) Questions that shape the future …………………………………… 189 9 Acknowledgements My heartfelt thanks go to my adviser, Professor Bo Carlsson, who has been a source of unwavering support, knowledge, thoughtful discussion and critique of my work. Thank you for giving me the opportunity to turn my dream into reality and for supporting me from day one until the very end. With sincere gratitude I acknowledge the contribution of Professor Matthias Hühn of the German University in Cairo. Far beyond serving as a member of my dissertation committee, you have been a mentor and an inspiration for me, and I cannot thank you enough for your generosity, both in terms of your time and valuable knowledge. To my husband Ahmed, and our children, Ali, Asmaa & Hussein: thank you for being patient while I was busy working when I should have been spending time with you. Like the sun, you bring cheer, warmth and brightness to my life every single day. I would also like to thank other members of my family, my dear friends, and my colleagues at the GUC for their support and for sharing my journey, in both its painful moments and its joyous times. Finally, I owe my biggest debt, my deep respect and my gratitude to my parents, who have instilled in me an insatiable hunger for knowledge, and through their actions have taught me that the best investment one can make is an investment in learning. 10 List of Abbreviations RCC: Resources, capabilities and competence RBV: Resource-based view of the firm RB: Resource-based DC: Dynamic capabilities CC: Core competence MSRP: Methodology of scientific research programs SRP: Scientific research programs SBU: Strategic business unit MNC: Multinational corporation ISV: Independent software vendor CMM: Capability maturity model TAT: Technical architecture team KPI: Key process indicator HR: Human resource ISO: International standards organization CT: Computed tomography CEO: Chief executive officer 11 The Resource-Capability-Competence Perspective in Strategic Management: A Re-Appraisal of the Epistemological & Theoretical Foundations Abstract by IMAN SEOUDI This study presents a review and re-appraisal of the epistemological and theoretical frameworks underlying an expansive body of literature that is of central importance to strategy, namely, the literature on resources, capabilities and competences (RCC). A thorough examination of epistemological and fundamental assumptions results in a structuring of the literature into three distinct schools of thought: (1) the rational-equilibrium school; (2) the behavioral-evolutionary school; and (3) the social constructionist school. The three schools are differentiated according to a set of dimensions spanning several levels of inquiry, including the epistemological, methodological and conceptual levels. In addition, the epistemological perspective employed results in an important re-interpretation of, arguably, the most important classic in the RCC field, namely