Dynamic capabilities: their relationship with organisational resources, processes, and performance in the Thai food industry
2017-03-06T06:05:49Z (GMT) by
How can business organisations survive and prosper under changing environmental conditions? This question lies at the heart of business and marketing strategies. This study uses the dynamic capabilities lens to address this question. The dynamic capabilities view has emerged as an extension of the resource based theory of the firm and is an emerging area with several challenges. Dynamic capabilities are seen as the ability of an organisation to purposefully create, extend, modify and reconfigure its resources base to address the environmental or managerial strategic contingencies through developing new substantive capabilities to gain a competitive advantage. The thesis addresses the following issues: What are the antecedents to the development of dynamic capabilities? This is a grossly under researched area and there are only a few empirical studies to draw from, although prior theoretical and qualitative research provides some initial insights. This study finds that existing resources and capabilities are fundamental to the development of dynamic capabilities. The principal findings are that deeply embedded processes such as market orientation and learning orientation are critical to the development of dynamic capabilities. The resources identified as also being central to the development of dynamic capabilities were organisational reputation and access to technology. Rather surprisingly, innovativeness and human resources did not appear to contribute much to the development of dynamic capabilities. Do dynamic capabilities mediate the relationship between organisational resources, and organisational performance? After selecting the dynamic capabilities to operationalise in this research, namely; integrative capability, marketing agility, and dynamic managerial capabilities; testing the mediation relationships was undertaken. The performance measures operationalised were marketing effectiveness, financial performance and long-term performance. The findings of this study are that dynamic capabilities mediate the relationship between organisational processes and resources with the various performance measures. In most cases the mediation was total, i.e. the relationship between the resources and performance measures was non-significant after controlling for the effects of the dynamic capabilities. Thus, in this study strong support was found for the proposition that dynamic capabilities mediate the relationship between processes and resources, and performance. The most important mediator was marketing agility, followed by integrative capability and then dynamic managerial capabilities. Do dynamic capabilities influence performance directly or indirectly through renewal capabilities? Addressing this question provides insights into a hotly debated issue in dynamic capabilities literature. Earlier literature (e.g. Teece et al., 1997) directly links dynamic capabilities to organisational performance. More recent studies (see Ambrosini & Bowman, 2009; Zahra, Sapienza & Wilson, 2006) suggest that the relationship between dynamic capabilities and performance is indirect. This study finds support for both views but notes that the predominant and most significant results favour the indirect effects. However, this research accepts that this may depend on a number of issues including, the dynamic capabilities chosen, the renewal capabilities operationalised and the competitiveness of the market. The study context: Data for this study was collected from the Food Processing Industry in Thailand. Thailand is an important contributor to global food trade and specifically a major source of rice, cassava, prawns and other sea foods; and a variety of processed fruits and vegetables. The effective sample size was 254 businesses located in various parts of the country. Methodology: All measures underwent rigorous evaluation for uni-dimensionality, convergent, discriminant and nomological validity initially using exploratory factor analysis and then purified (if necessary) using confirmatory factor analysis. The data was analysed using SPSS version 20 and AMOS version 20. To test the hypotheses, multiple regressions were used for direct relationships and AMOS was used for testing mediation relationships. Implications of the Study For Academics: This study contributes to theory and academia in several ways. First this study is one of the few that have developed measures of dynamic capabilities, operationalised the measures, tested their robustness and established strong psychometric properties. While extant literature was helpful in providing insights, new scales had to be developed since none existed. The new scales are for integrative capability, marketing agility, and dynamic managerial capabilities. Second, while the question, “Where do dynamic capabilities come from?”, has been discussed and conceptualised, this is one of the first studies to actually empirically test the propositions. The results from this study indicate that the few resources and processes tested contributed between 40 per cent and 65 per cent to the variation explained among the dynamic capabilities. This suggests that the resources and processes were well chosen and that there may be a few processes critical to the development of dynamic capabilities. Third, this study empirically establishes that dynamic capabilities mediate the relationship between resources and various measures of organisational performance. Thus, this study helps to position the discussion of dynamic capabilities by identifying that they are key mechanisms for transmitting the effects of resources and processes to performance. Finally, the study attempts to address the issue of whether dynamic capabilities influence performance directly or indirectly. This study did not find conclusive support for one perspective and it is argued future research is needed to settle the question. For Managers: This study makes dynamic capabilities accessible to managers by showing how they are conceptualised, operationalised and related to other variables especially to organisational performance. The study shows that dynamic capabilities are necessary but not sufficient to yield competitive advantage since their effectiveness depends on market dynamics, degree of competition, their uniqueness and their possession of VRIN characteristics. Further, managers must consider developing dynamic capabilities because they lead to performance outcome directly and (or) indirectly. Limitations of the Study A study of dynamic capabilities probably would be most effective if it could be longitudinal so as to be able to establish cause and effect. However, in this doctoral program, this was not possible because of time and resource constraints. Secondly, the model of this complexity required a lot of data. Thus, the effective response of 254 businesses was not adequate to run the full structural equation model. Hence path modelling was used. This has the disadvantage of not taking measurement errors into account. Third, because of lack of prior operationalisation of the dynamic capabilities used in this study, the generalisability of the measures requires replication to give more evidence of robustness in different contexts. The context of the study being a developing country may also suggest such a study should be undertaken in a developed economy to see if the findings are similar.