Revised definition of the capabilities’ principles
This article is by Alex Chenevier of Managitech.com. The author agrees that this is the sole work of the author and that these are the views of the author, and the author is responsible for the accuracy of the content.
Introduction
The grandest problem in the field of strategic management is understanding how firms build and maintain competitive advantage over the long run (Teece, 2017). Coming across overdue problem, macro economist Dambisa Moyo (2018) said “creating sustainable economic growth in the twenty-first century requires no less than aggressively retooling history’s greatest engine of growth, […] capitalism itself”.
The subject has been aggravating as the question of “capitalism in his current form” ref. anthropologist Gillian Tett, from the editorial of the Financial Time, “is not what Adam Smith sketched out”. The argument has been incentivized incl. economist Yanis Vafourakis (2023) describing the advent of ‘cloud lords’ in his book technofeudalism.
Today, the ‘competences puzzle’ (Nelson et al., 2002) i.e. “start, pivot, grow, pivot retest, pivot” as often as required (Ries, 2011) are encountering fatigue. Theories, frameworks, categories are arguably not compelling. In the end, what becomes clear is that firms cannot expect to “purchase” sustained competitive advantage on open markets (Barney, 1986a). Rather such advantages must be found in the rare, imperfectly imitable, and non-substitutable resources already controlled by a firm (Dierckx & Cool, 1989).
In this vein, focusing on the theory of the firm, evolutionary theories can be regarded as a subset of a wider class of theories, variously described as ‘capabilities’, ‘resource-based’, or ‘competence-based’, theories of the firm (Hodgson, 1998). There is nowadays an overwhelming consensus and admiration for the capabilities principles, although with an enduring quality of being “abstract” and therefore “with limited utility” (Chenevier, Teece, 2021).
In the retooling, of unique magnitude, strategy research, burdened with an immense body of obfuscator grammar, obscures the fact that competitive advantage and performance are related definitionally, not functionally (Powell, 2002). This direction of travel opens the opportunity to re-qualify the firm as an economic phenomenon. This article aims at introducing this new framework i.e. “cracking the code of philosophical change”, by tooling economic phenomena - with a complete & comprehensive repertoire - that perimeter, even and lock complexity in isolation and reciprocation.
Economic phenomena are composed of abstractions
Decisively, (Knight, 1921) said that “the very conception of an exact science” involves abstraction, individual chains of sequence by logical processes or behavior, called laws, is descriptions of the separate elements of phenomena […]. Subsequently, the way to find the mother of invention (Wiley, 1969) i.e. interactions between pure consciousness and its objects can be reached through phenomenological reduction, a method whereby all factual knowledge and reasoned assumptions about a phenomenon are set so that pure intuition of its essence may be analyzed (Husserl, 1931).
Kant (Kemp, 1968) invoked the transcendental schema, pre-condition to all possible experience. Senge (1990), apostle of the learning organization, emphasized “system thinking” as a discipline that integrates the disciplines, articulating generative (i.e. active) and adaptative (i.e. passive) learning as a philosophical alternative; to […] the pervasive ‘reductionism’ Western culture - pursuit of simple answer to complex issues-. Precisely, capabilities can abstractly be thought as “intermediate goods” (Amit, 1993).
Economic phenomena are taxonomies of 4 types of abstraction those equal 4 types of capabilities
Retooling these “intermediate goods” in Aristotle (1937) teachings, every change including coming into being is considering its physical composition, essential form, external influences, and ultimate purpose. Upon the indispensable updated version in the theory of the firm, “why firms […] exist is that their cross-border presence, entrepreneurial capacities, and organizational capabilities are integral to the market creation and co-creation process, both upstream and downstream, and also laterally.” (Teece, 2014).
Coincidentally, Collis, (1994), did record four types of capabilities, addressing all actions and consequences, in isolation: […] zero level, dynamic improvements, ‘able to recognize the intrinsic value of others resources, ‘meta capabilities’/ad infinitum. Differently, economic phenomena allow a horizontal means that, one learns to look beyond what is close to hand, […] to see it better within a larger whole and in a truer proportion (Kaiser, 2014:3501).
The 4 types of capabilities are composed of zero level, ordinary, dynamic -that can be divided into two groups-
As Dr Teece constructed indispensable ordinary and dynamic capabilities. It is now possible to foursquare laterally zero level and meta-capability/infinitum at both ends of the phenomenon. As such, abstractions in the general field of knowledge are capabilities in the field of economics. They unfold a longitudinal field of studies of intra-organizational phenomena incl. zero level, ordinary, dynamic and meta capability (Chenevier, 2024).
PS: Retooling innovator dilemma book, Dr Christensen -of course- arguably brought anxiety to the practioners, but missed the chance to relocate his findings into cognitive bonds albeit available in the capabilities’ principles. Therefore his description ‘An organization’s capabilities become its disabilities when disruption is afoot” (2003:7) is now assimilated-systematized in Dr Teece’s grammar of capabilities, as disable. (Chenevier, 2024)
Innovator phenomena turn capability abstraction pitfall into a meaningful method
Bottom line is that compositionality is problematic […] the meaning of the whole is not only determined by the meaning of the parts, but feeds back to produce shifts in meaning of the parts. (Janssen, 1997)
At this junction, a revised definition of Teece, Pisano, Shuen (1997) is now available. “The firm’s ability to integrate and build, before reconfigure internal and external competences to address rapidly changing environments” can now be “The firm’s ability to integrate and build, before reconfigure often selectively, sometimes concurrently internal and external competences to address rapidly changing environments” (Chenevier, 2024).
Conclusion
In any event, this economic analysis of the firm [ref. capability principle] will strengthen and enrich a more varied and positive role for managers than that of larcenous leaders (agency theory) or anonymous automata (cost minimization and optimization models) (Teece, 2014)
Maybe economic phenomena are “temporal resolution” of the paradox (Volberda, 1988). At the end, Lao Tse perceived that “mundane reality” can be apprehended through perceptual and conceptual distinctions. But in the ultimate reality, all such distinctions dissolve. In accumulating knowledge, we are invited to renounce the mind.
Footnote: I am grateful for the comments and endorsement of Professor Teece, UC Berkeley.
Alex Chenevier, Discontinuous Innovation Specialist
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