The Process of Creating Dynamic Capabilities - CiteSeerX

The Process of Creating Dynamic Capabilities Submitted to the: British Journal of Management Cynthia A. Akwei1 The Business School Loughborough University Loughborough Leicestershire LE11 3TU Tel: +44 (0) 1509 222800 Fax: +44 (0) 1509 223962 Email: [email protected]

Joe Peppard Cranfield School of Management Cranfield Bedfordshire MK43 0AL Tel: +44 (0) 1234 754421 Email: [email protected]

Paul Hughes The Business School Loughborough University Loughborough Leicestershire LE11 3TU Tel: +44 (0) 1509 228274 Fax: +44 (0) 1509 223962 Email: [email protected]

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Corresponding author.

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THE PROCESS OF CREATING DYNAMIC CAPABILITIES

ABSTRACT

The concept of dynamic capabilities (DCs) is receiving significant attention from scholars in strategy and organisational research. However, most of the research is conceptual. In this empirical paper, the process of how DCs are created in two organisations is examined using the grounded theory methodology with the aim of developing a substantive theory of DCs creation. Data was collected using semi-structured interviews and this data was analysed using the constant comparison method to identify and explain the process through which DCs are created. The findings from the study reveal that DCs are developed and renewed through continuous internal activities such as in-house innovations, human resource (HR) activities, learning activities and external activities with partners through collaborations and acquisitions. It is the consequence of these activities that leads to the development of DCs. From the findings a framework of the process of creating DCs is developed. Implications for academics and practitioners are discussed and limitations and directions for future research are outlined.

Key words: Resource-Based View, Dynamic Capabilities, Resources, Competitive Advantage, Grounded Theory.

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1. INTRODUCTION

The concept of Dynamic Capabilities (DCs) in the Resource Based View of the firm has gained rapid recognition as a potential source of achieving and sustaining competitive advantage in organisations (Teece et al, 1997; Eisenhardt and Martin, 2000; Rindova and Kotha, 2001; Zollo and Winter 2002; Keil, 2004; Ethiraj et al, 2005, Zahra et al, 2006). DCs have been identified as change agents that allow organisational development and renewal of their capabilities enabling them to respond to changes in external environments (Teece et al, 1997) and renew resources (Zahra et al, 2006).

While the DCs concept has been found to be a significant source of competitive advantage, the process through which organisations develop DCs is lacking empirical investigation (Williamson, 1999; Rouse and Dallenbach, 1999; Priem and Butler, 2001, Easterby-Smith, 2006, Zahra et al, 2006). The research reported in this paper empirically explores this process of creating DCs. From our data, a framework describing how organisations create DCs through their everyday activities and routines is derived. The model offers empirical explanations of the process of creating DCs, explaining micro and macro conditions, and describes the various iterative and simultaneous activities and routines used to develop DCs.

The paper begins with a review of the concept of DCs exploring how it is considered and highlighting the knowledge gaps in this literature. The research method is then described and this is followed by presenting the theory illuminating the process of creating DCs. The paper concludes by highlighting the implications of the findings and directions for future research.

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2. CAPABILITIES AND DYNAMIC CAPABILITIES

To understand the DCs concept and the process through which they are created, it is important to first define the term ‘capability’. In the strategic management literature capability generally refers to a firm’s capacity to deploy and coordinate resources (Amit and Schoemaker 1993; Eisenhardt and Martin, 2000; Grant 1996). For example, Day (1994: 38) describes capabilities as “complex bundles of skills and accumulated knowledge, exercised through firm processes that enable firms to coordinate activities and make use of their assets”.

From the literature, it is apparent that capabilities are firm specific, being

embedded in the firm and its processes and, because of this, cannot be easily transferred without transferring the subunits or acquiring the firm possessing the capability (Teece et al, 1997). Definitions also emphasise that the primary focus of a capability is to enhance the productivity of other resources that the firm possesses (Makadok, 2001).

DCs, on the other hand, are the ability of a firm to create new capabilities and renew its resource base from within and outside the firm in order to adapt to a changing business environment (Teece et al, 1997). In this paper we define DCs “as a set of learned behaviours, which are fully or partially repeated resulting partly from tacit knowledge, specific organisation objectives, combination of resources and activities which brings about change”.

The concept of DC is not without its distractors. They have been criticised as tautological, endlessly recursive and non operational (Mosakowski and McKelvey, 1997; Williamson, 1999; and Priem and Butler, 2001). It is also argued that the concept lacks empirical

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grounding and insights into the mechanisms through which firms achieve competitive advantage in high velocity markets (Mosakowski and McKelvey, 1997; Williamson, 1999 and Priem and Butler, 2001).

While there is a plethora of strategic management theories and frameworks that attempt to explain how firms achieve and sustain competitive advantage, the extant theoretical and empirical data on how DCs are created remains sketchy and a subject of debate within the strategy literature. Much of the research is conceptual (c.f. Teece et al, 1997; Eisenhardt and Martin, 2000; Zollo and Winter, 2002; Bowman and Ambrosini, 2003; Zahra et al, 2006) and it is acknowledged that how firms create, and hence renew, DCs demands further research (Teece et al, 1997; Zollo and Winter, 2002; Keil, 2004; Volberda, 2004; Ethiraj et al, 2005, Easterby-Smith, 2006; Zahra et al, 2006). An examination of the existing literature reveals the lack of an empirically grounded theory to explain the creation of DCs at the organisational level.

Indeed, most studies exploring the creation of DCs draw on findings from different streams of literature such as product innovation, supplier relationships, human resources, and marketing (Teece et al, 1997; Eisenhardt and Martin, 2000; Zollo and Winter, 2002; Bowman and Ambrosini, 2003; Zahra et al, 2006). For example Eisenhardt and Martin (2000) identified product development, acquisition, strategic decision-making and alliancing as DCs. The applicability of these conceptual theories and frameworks in conducting extensive empirical research into the effects of DCs on firm performance has been questioned primarily due to the vague nature of the concepts that underpin them and the differing levels of analysis that these theories draw upon (Jantunen, 2002).

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Those few empirical studies that do exist have been criticised (Volberda, 2004) because it focuses on the functional-level processes of developing DCs (e.g. product development and innovation, information technology, marketing and operations) (c.f. Rindova and Kotha, 2001; Ethiraj et al, 2005; Mengue and Auh, 2006). The empirical evidence available so far does not offer an in-depth insight into both the organisational level processes and activities of creating DCs in the entire organisation.

To address this question, we conducted a study to examine how DCs are created. Based on our empirical data, a model of the process of creating DCs was derived. The proposed theory addresses the question of how DCs are developed at the organisational level, explaining why organisations develop and renew DCs, identifying what the key resources required are and illuminating the actual activities and routines through which DCs are developed and renewed.

3. METHODOLOGY

Data was collected using a grounded theory methodology with the aim of developing a substantive theory of DCs creation. The grounded theory approach was selected because it is an effective and appropriate way of researching emerging phenomena in its own organisational and human context (Van de Ven et al, 1989). Data was collected from two sites, Rolls Royce and Sage PLC. Both are high technology companies based in the United Kingdom involved in technology, manufacturing, and new product development, and operating in highly changing business environments.

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Rolls Royce plc is a global company providing power for use on land, at sea and in the air. The company maintains leading positions in civil and defence aerospace, marine and energy markets, operating in 50 countries and employing 35,400 people, of which 21,000 are in the UK. Their main product is gas turbines. Rolls Royce performed strongly in 2004, with a 21% increase in underlying profits before tax and that enabled them to reduce their average net debt for the year by 41%. They also achieved their highest ever order in-take. The performance of the company’s share price over the past five years and their continued strong performance show that Rolls Royce remains highly competitive.

Sage plc has grown rapidly through acquisitions to become the world’s leading supplier of business management software and related services to small and medium sized enterprises. Sage plc supplies accounting, payroll, retail, and CRM software for small and mid-market companies as well as specialist applications for manufacturing, construction and accountants in practice. Sage employs over 1500 people in the UK and has performed consistently over the years. When compared to 2004, Sage’s performance in 2005 was strong: turnover increased by 14% to £776.6m; operating profit increased by 14% to £211.1m; pre-tax profit increased by 13% to £205.4m; and, earnings per share increased by 13%.

Sage has

consistently maintained its competitive position as number one supplier of accounting software to small and mid-market companies.

Semi-structured interviews were employed as the main tool for data collection supported by emails and documentary evidence (annual/quarterly/project reports). A total of 27 interviews were carried out. The participants for the interviews were directors along with senior and middle managers. They were selected for the study using theoretical sampling, which is

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based on their theoretical relevance for furthering the development of emerging categories in the process of creating DCs (Glaser and Strauss, 1967).

All the interviews were transcribed and the N-Vivo qualitative data analysis software was used to assist with describing and analysing the data. The data was analysed using the constant comparative method (Glaser and Strauss, 1967) and theoretical comparisons (Strauss and Corbin, 1998) of joint coding and analysis of qualitative data. About 80% of the categories and concepts developed for the theory were ‘in vivo’ codes, which were the actual words of the interviewees used as concepts and categories. The remainder were labels placed on categories by the researchers due to the meaning the categories evoked during comparative examination of the data (Strauss and Corbin, 1998). Figure 1 illustrates the analysis process. …Insert Figure 1 here… Data analysis started as soon as the first interview was conducted. Initially categories were identified during interviews, which were written down as field notes. After that, full transcripts of the recorded interviews were made and the Strauss and Corbin (1998) approach to grounded theory—open, axial and selective coding—was adapted for the analysis. Detailed line-by-line open coding was carried out at the beginning of the study, which helped to generate the initial categories, their properties and dimensions (see appendix 1). For example, we began data collection with an interview with the Head of Business Management at Rolls Royce. Preliminary coding of the interview data suggested that there are many ways to developing DCs including recruitment of graduates, postgraduates and experts, HR activities, training, people development activities, joint ventures, partnerships and acquisitions. Further interviews in both Rolls Royce and Sage plc were undertaken to uncover additional ways of developing DCs and to compare for general

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manifestations of patterns in the data. The contrast surfaced some similarities and variations especially within the properties and dimensions of the initial categories. For example, the interview with the Director of HR in Sage revealed that they recruit a significant number of graduates and domain experts as well as undertaking many acquisitions and partnerships to develop DCs.

The next stage of the analysis was axial coding, where the categories, properties and dimensions were integrated to form relationship among the categories. Using Strauss and Corbin’s (1998)

paradigm model—conditions, strategies, action and interactions and

outcomes—the categories and concepts were then grouped together to form clusters that might have conceptual value in identifying patterns, similarities and differences in the data (Goulding, 2002). For example, recruitment of many graduates and postgraduates, recruitment of a few to many experts, training and people development activities were grouped under the category HR activities as the sub categories are all HR activities (see appendix 2). In order to ensure the full integration of the concepts, we carried out theoretical sampling to gather more data about the categories that we had; this was conducted until all categories were saturated. Memos were written as the researchers went through the three stages of the analysis and also data was frequently compared to the literature to synthesise the emerging theory.

In order to make further sense of the theory that was developing, the researchers through selective coding, further integrated the categories and refined them by reducing terminologies, selecting core category and filled gaps that were identified through further data collection and reviewing already analysed data. The main category that emerged from the theory was that of developing and renewing DCs. This category was selected, as the core

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category, because it has the ability to pull all the concepts together to explain the phenomena of creating DCs (see appendix 3). The theory emerged through finding similar processes for developing and renewing DCs, which involves internal and external approaches through four main activities.

The model and substantive theory developed from the grounded data describes and examines the main features of the process of creating DCs. It explains the continuous and sustained internal and external approaches through the following activities: in-house innovation, human resource activities, collaborations and acquisition with learning activities as an intervening mechanism, which leads to the development of DCs of innovativeness, knowledge management, market orientation, ability to manage people, collaboration and acquisitions. The theory shows that developing DCs is both an implicit and purposeful process. It is implicit when DCs are developed as a by-product of the organisation developing and renewing their static organisational capabilities. It is purposeful when the organisation intentionally plans and sets out activities to develop DCs. The continuous ability of the organisation to undertake the process of DCs creation leads to the development and renewal of DCs. Therefore, the activities identified in this theory are not, in themselves, DCs but are a means to developing DCs. Hence, the routines and best practises such as product development and acquisitions identified by some researchers as DCs (c.f. Eisenhardt and Martin, 2000) are not DCs but the means through which DCs are developed and renewed.

4. THE PROCESS OF CREATING DYNAMIC CAPABILITIES

This section presents the theoretical discussion of the process of developing DCs. Figure 2

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illustrates the process of creating DCs and Table 1 explains the components of this process. …Insert Figure 2 here… …Insert Table 1 here… Due to the limited space available for this paper, the process of creating DCs is discussed using one of the DCs identified; specifically, ‘innovativeness’. The process through which the other DCs are developed will be discussed in subsequent publications.

4.1

Improve and Sustain Competitiveness

The two participating companies develop DCs of innovativeness as a result of certain external challenges in the environment. The external causal conditions for developing DC of innovativeness include customer demands, legislative requirements that vary from government legislation requirements, worldwide legislation to local government legislation requirements, technological changes and the competition that companies face within markets. Due to these challenges, the participating companies have to develop the DC of innovativeness to enable them improve and sustain their competitiveness. The participating companies subsequently adopt certain strategies to develop this DC.

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Strategies for Developing DC of Innovativeness

The two participating companies adopt both planned and emergent strategies to develop the DC of innovativeness. The planned strategies include the business and product strategies and the Technology Capability documents. These documents detail how capabilities will be developed. The planned strategies enables the companies to understand the requirements to deliver the product or service, the expected returns on investment and the capabilities and resources required to deliver the strategy.

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Although the participating companies have planned strategies, when developing DCs of innovativeness most of the strategies used are emergent. The strategy emerges during the process of people working, undertaking generative and adaptive learning and conducting business intelligence. They learn and develop new ideas and processes about innovations. The Product Director, Sage noted that: Everyone has got planned strategies but they never get followed fully. We certainly have plans, but we look at a particular technology because we have seen it emerging and it is beginning to gain some tracks.

While the Head of Business Management, Rolls Royce announced: We sort of plan ahead and that sounds dreadfully sort of organised almost stylist organisation but it is not quite like that but it flows and emerges with the demand over time.

Further, the managers in the two participating firms maintain a medium to high degree of flexibility in their structured approach and this allows them to change the course of a project to incorporate emergent ideas and changes during the process. The planned and emergent strategies are implemented by identifying key resources and internal and external approaches through activities such as in-house innovations, HR activities, collaboration and acquisitions.

4.3

Decision of Development Approach, Activities and Key Resources

4.3.1 Key Resources Required to Develop DC of innovativeness 4.3.1.1 Tangible Resources The tangible resources used are financial and physical. The financial resources involve a variation of internal and external sources of funding, which enables the companies to invest in research projects and programmes; to attract the right people; in facilities for training and education and for testing equipment; and to collaborate and acquire other companies.

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Managers in both participating firms use either internal or external funds or both. The physical resources required are good infrastructure such as testing and training facilities for developing, and testing products and information technology.

4.3.1.2 Intangible Resources The companies also use intangible resources such as human capital, structural capital and relationship capital. To develop DCs of innovativeness, the companies require skilled people and integrated teams with technical skills, knowledge and high-levels of creativity. The companies must provide the right incentives, structured processes for innovation, and have a culture that fosters innovation. In the two participating companies, incentives are exemplified in processes such as the gated process, procedures for product development, business models, the ownership and empowerment of staff, the entrepreneurial culture created in both companies, the commitment of senior management and a transformational leadership at all levels of the firm to ensure effective performance. The companies also require relationship capital which gives them feedback on their products and services to assist with new innovations to satisfy their customers. These resources identified are combined with certain internal and external activities to develop the DC of innovativeness.

4.4

Internal and External Activities for Developing DC of Innovativeness

To develop DC of innovativeness, the participating companies use both internal and external developmental approaches. The internal approach to create DCs occurs when the companies use only in-house resources, skills and capabilities to develop DCs. The external approach of developing DCs is adopted when the participating companies cannot develop the DC of innovativeness in-house and therefore collaborates or acquire other companies for the

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remaining skills and capabilities. The main activities for developing the DC of innovativeness are: in house innovations, HR activities, collaborations and acquisitions.

4.5

Activities for Developing DC of Innovativeness

4.5.1

In- house innovations

The rationale for conducting in-house innovations is to develop the ability to innovate and the ability to be competitive in markets by bringing new products and new business models to market and to gain first movers advantages. In-house innovations are geared towards learning both generatively and adaptively in the participating companies. In the companies learning generatively emerges from any part of the business. This involves generating new ideas through experimentation, rapid learning and feedback and these lead to the development of the skills, innovations of new products and the ability to develop more new ideas in companies.

The degree of conducting in-house innovations to develop DCs takes the form of medium to very high level of innovation, which can be classified as incremental, revolutionary or both. The participating companies use three different types of in-house activities to develop DC of innovativeness. These are business scope innovations, organisational innovations and structural innovations. To develop innovativeness through the business scope innovations the companies make consistent investment in R&D and research and technology (R&T), and new product development (NPD) while also monitoring competitors to identify the kind of new developments that are coming to markets. The R&D, R&T and NPD activities conducted to innovate vary from small to very large projects. Managers in the participating companies noted: Well I suppose one of the things we have tried to do is that we have had a consistent R&D strategy (Company Specialist, Rolls Royce).

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It is through product development, having specialists within the firm who are sort of always going on and about and aware of the latest developments in the field, whether they are within our competitors or through information on searches on patterns in both UK and abroad (University Liaison Officer, Rolls Royce).

The companies also have a very solid research base, which vary from a strong strategic research centre to R&D departments. The research and R&D departments are responsible for generating new ideas in technology and potential new business opportunities. Management of business scope innovations is a very important aspect of creating DCs which is a combination of people and how the technology acquisition process is managed. For example Rolls Royce has a Director of Research and Technology who has the overall responsibility for ensuring that R&T programmes are meeting the various different business needs and a dedicated project management team to ensure that projects are managed in accordance with budgets and timescales.

In addition, experimentation, demonstration and testing are used to ensure the efficiency of a product when transforming a new technology into a product or developing a new product. Through experimentation, demonstration and testing, new ideas and insights emerge, problem areas are tackled and exit routines are carried to discard any part of the project that is not functioning properly to ensure efficiency. Through these processes, the firm develops the ability to manage their R&D and new product developments.

Organisational innovations take the form of internal innovations of structures and processes to support the efficiency of the business scope innovations. The rationale for carrying out organisational innovations is to ensure the continuous efficiency and effectiveness of the internal firm structures, the business processes of the firm and to develop and renew the ability to manage the processes in an effective and efficient way. The types of organisational

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innovations carried out to develop the DC of innovativeness include the creation of business process management initiatives, new organisational structures, evaluating business models, and establishing processes for recruiting and developing people in the organisation.

Structural innovations involve the development of innovative systems of working with customers and partners to develop DCs. The aim for innovating structurally is to develop effective and efficient ways of providing the best products and services to customers as well as effective working relationship with suppliers and partners. To develop the ability to innovate structurally the companies develop agile business models that are creative, flexible and reliable, which supports their products and offer good customer support to partners and customers. The types of structural innovations used to develop DCs of innovativeness are financial models, university technology partnerships (UTPs) models, and customer care models. The latter vary from total care packages, corporate care packages, service contracts, support contracts to reseller’s model. To develop DCs of innovativeness, managers have used these models to build close relationships with and to provide maximum customer service to their customers and partners. According to the Business Development Management, Rolls Royce: We offer the customer clearly full support of our existing products. We also offer a number of deals by which we do risk analysis for them, so we guarantee products in the deal. Learning generatively and adaptively through in-house innovations affords the companies the opportunity to develop new products, services, new processes, and work practices for innovation. Through continuous learning from the in-innovations the company develops the ability to improve upon their innovation processes and outcomes thereby developing the DC of innovativeness.

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In addition to in-house innovations, the participating companies also bring in new people with experience and skills, train existing staff, collaborate with universities and partners to develop new processes and technology as well as acquiring other companies to develop innovativeness.

4.5.2

HR Activities

The data highlighted that to develop DCs of innovativeness; organisations need people with appropriate expertise and skills that have a high level of creativity. To achieve this, the participating companies frequently carry out a large number of HR activities and the type of activities used includes recruitment, people development and training. As noted by the Head of Business Management, Rolls Royce: I think we have many routes to doing that we recruit very bright top end of graduates we like to think we get the crème…We do go to some of the very best graduates and we bring them to the organisation that is always a continual flow we try and maintain that dream down to the end. The participating companies bring in new people with expertise, skill and high level of creativity through recruitment. Recruitment approaches vary from hiring graduates and postgraduates to specialist, domain experts and recognised industrial experts from universities and recruitment markets. Also, staff are rotated across different departments. The types of people recruited were identified as top end graduates, very bright, very intelligent and renowned experts with specialist and generalist skills.

The second type of HR activity relate to people development. These include identification of potential highfliers or talents, personal development and career development activities. The intensity of people development activities goes right across the whole company; staff at all levels are developed all the way through their career through continuous skills and personal development. This was emphasised in both companies:

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I think we are good as a company in developing people that is another capability, recruiting and developing people (Head of Strategic Research Centre, Rolls Royce). Development is giving them a career path and a progression which allows you to grow those capabilities and then grow those people to a point where they can be called experts in their field (Manager Technical Support, Sage).

The third type of HR activity used is training. The types of training programmes used are induction programmes, process-based learning, management development programmes, leadership training, internet based training, tool box, on the job training, technical learning, graduate training programmes and big demonstration programmes. To develop DC of innovativeness, these training programmes are available and also relevant to the operations of the business. People in the organisation are trained for both current and future roles on a continuous basis. Training programmes used vary from formal to informal. Formal training is typically classroom-based training programmes while informal training is received through support from experienced staff and on-the-job learning. In the two participating companies, the training department organises training programmes for employees based on inputs from their managers (from development reviews) or capability skill owners.

The outcomes of HR activities lead to the development of DCs of innovations in the companies. Recruitment involves bringing in people from other industries or departments to augment the existing skills and capabilities in the organisation. The new people recruited bring in new ideas, knowledge and expertise, different types of skills, and new processes. As a result of this, the organisation learns new work practices and processes, develops new skills and work practices, which helps to renew the skills of people in the organisation and develop new ways of doing things. Through continuous training and development, managers build and enhance their people capabilities and are able to retain these skills and knowledge

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developed within the organisation. People development and training activities in the organisation help staff to understand changes in the market and prepares them with the right skills and knowledge to meet these future changes. In so doing they develop the ability to sense the market and the flexibility to adapt to the changes in the market.

4.5.3

Collaborations

The participating companies also collaborate with other stakeholders to develop innovativeness. This varies from equity to non-equity and the types of stakeholders collaborated with include manufacturers, suppliers, customers, partners, universities and professional bodies. The type, amount and form of collaboration used also vary. The participating companies carry out different levels and numbers of collaborations and the types of collaborations identified were: strategic alliances (or joint ventures – JVs), research partnerships with competitors and others, and ample networking which also varies from direct networking to third party networking.

The formation of strategic alliances particularly the formation of many JVs contributes to the development of DC of innovativeness. JVs are typically formed to gain a crucial piece of technology, intellectual capital, bring together specific skills, resources and acquire capabilities in such ways that may complement each other. For example, Rolls Royce has many JVs and about 40% of their engines are manufactured through partnerships. The data suggests that using JVs to develop DCs of innovativeness depends on a number of factors. First, the JV must have a commonality of purpose for the two parties coming together, it must be open, and both parties must be very honest to each other. Secondly, there should be clear objectives at the outset of the JV formation stating issues on equity, benefits and clauses that apply for the break-up of the JV. JVs can be both successful and unsuccessful.

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The organisation learns from the successful ones to build upon the less successful areas in order to develop superior ability when dealing with the next JV.

Another form of collaboration for developing the DC of innovativeness is partnership with other companies. For example, Roll Royce has partnership with universities to carry out research and technology development. Networking is also an important collaborative effort in developing DCs externally. The external networking could range from formal to informal networking and direct to third party networking. Managers from the participating companies get involved in direct networking with customers, suppliers and partners to get them to understand their products, the latest products and services and gather information on their products and services. In a bid to get closer to their customers, these companies employ different long-term schemes such as service contracts, financial models, total care packages, social events, research, direct interactions with customers and partners and according to the Product Manager, Sage: We have a very strong relationship with our customers and we put customer service very highly on our agenda, it is something that we measure and try to improve more on constant basis”. Product Manager, Sage

In addition to direct networking, companies use third party networking, which involves gathering intelligence from the wider world through attending UK and international conferences where managers of companies interact with competitors, partners and customers to gain knowledge of current issues in their business.

Through the continuous use of collaborations, organisations develops significant control over their cost base, the opportunity to inform suppliers and/or partners of their customers needs, the use of supplier’s skills and expertise, good control over their intellectual property and quality issues. Overall, collaborations bring in additional skills and knowledge to the

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organisation, which they would not have readily or could not develop at all. With continuous learning from successful JVs, partnerships and networking leads to the development and renewal of the ability to innovate. Third party networking affords the organisation the opportunity to have access to good intelligence on their customers and competitors, which is built into developing new products and services improving their ability to innovate.

4.5.4

Acquisitions

DCs of innovativeness is also developed through acquiring capabilities by acquiring companies. For example Sage frequently acquires other firms as the main external source of developing and renewing DCs. In the last 15 years Sage has carried out 24 acquisitions. The main focus of acquisition is on those with proven technology or knowledge. The company employs well defined process for making acquisitions. Although acquisitions are handled on a case by case basis, the process for a successful acquisitions to develop DC of innovativeness depends on (1) the ability to select appropriate acquisitions (2) the ability to appraise the financial returns available from the acquisition and, on that basis, the price that should be paid and (3) the ability to integrate the acquired firm into the operations of the acquiring firm.

Integration takes two main forms. The first is a complete integration within the acquiring company of the acquired by bringing them physically into the company’s building. This can be immediate or a gradual process of integrating the people into the culture of the acquiring company.

The second form is partial integration, keeping the acquired company

independent to operate from their old location; bringing them into the corporate office is seen as having potential to destroy the capabilities acquired. In this instance the acquired company retains all “the good people” but leave them alone to flourish. Here integration

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occurs through some cross fertilisation and transferring ideas in a non-intrusive manner through best practice sharing. However there is a core group that overseas the operations of the independent acquired companies. The adoption of a complete integration or independent to partial integration of the acquired company depends on the quality of the company, type of acquisition, size of the company, the technology acquired and the intensity of need for that particular technology and capabilities. According to the Manager, Mergers and Acquisitions, Sage: “There are two approaches, we can either completely integrate them into the business or we can operate them at arms length as a small team by themselves. So it is not always a case of you just bring them into the company we might acquire them and let them get on with things in the background without disrupting the way they work too much”. A mergers and acquisition team manages the acquisition process through selection to integration. Selection and acquisition of a firm depends on the financial resource position of a firm because there is a cost implication when making acquisition and it has to be taken into consideration. The Director of Investor Relations at Sage noted: “Our local businesses are active in the ability to select appropriate acquisitions and the centre [Sage Group] has the ability to appraise the financial returns available from the acquisition”. The ability to select, appraise and integrate acquisitions and the continuous process of making and learning from the acquisitions leads to the development of DC of innovativeness. The learning experience from making acquisitions whether successful or unsuccessful builds up the ability to select make and integrate acquisitions. The acquisition brings in knowledge, technology, skills, processes and experience which lead to changes in the processes and procedures for innovating in the companies.

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4.5.

Learning activities

The in-house, HR activities, collaborations and acquisitions bring knowledge, skill and experience into the companies. To develop DC of innovativeness analysis indicates that the companies must learn from these activities to maximise and retain the value from the knowledge and experience created in the companies. The grounded data suggest that learning activities act as an intervening mechanism for developing DC of innovativeness.

The participating companies use structured processes such as formalised and non-formalised systems to process information and retain and utilise knowledge. At Rolls Royce there is a dedicated learning activities team who develops techniques, processes and tools to help create and manage knowledge to ensure that it, together with best practises, are shared across the entire company and utilised through training programmes. In addition, the team also benchmarks with other firms to identify best practises in learning activities. The firm sponsors research programmes to identify best ways of managing knowledge. These learning activities were emphasised by a Senior Electrical Engineer at Rolls Royce: So we have a knowledge management team and they have been for years looking at techniques and processes, tools to help manage knowledge better in the company. So they have looked outside of what other people have done and so we have learnt from BP, US army, certain techniques that they have employed. We have been sponsoring research in UTPs around learning activities and how we can do it. We sort of brought these things into the company championed them and supported them being applied to the benefit of the company. So it is something that we recognised probably about ten years as an important area.

There are three different types of learning activities and these are knowledge creation, capture, articulation and utilisation. Knowledge is created in the companies through the internal and external activities. Maximising the knowledge and the experience that is created helps the business to develop the ability to tap the full potential of their knowledge, skills and experiences and this is achieved through knowledge capture. Two

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different types of knowledge are captured, tacit and explicit. The participating firms laid emphasis on tacit knowledge as critical for developing and renewing DCs because it is not observable and therefore could be a source of competitive advantage as opposed to explicit knowledge. This is supported by the Mergers and Acquisitions Manager at Sage: I think we are in a phase of development where organisational learning is almost about documenting processes and best practices that we have around the business because we are quiet maturing in some ways and grown so rapidly. I think that is the key thing, laying down these best practices. To develop DC of innovativeness, employees therefore have to learn and then use this new knowledge. Knowledge articulation is the medium through which the knowledge and best practise is shared in the companies. The tools used for this purpose in the two participating companies include having a capability intranet, providing training programmes and establishing communities of practice. The capability intranet is a computer-based storage of knowledge, which organisation members tap in to for access to knowledge that is relevant to their type of work. Both companies run training programmes to update their employee’s knowledge and skills. Further knowledge is also articulated through setting up communities of practise (CoP). A CoP is an informal network involving firm members with similar interest who come together and share knowledge and best practise on particular subject areas of their work. The following quotes from the interviews illustrate the point on knowledge articulation: At Rolls Royce, the value of CoPs is evident: So we have done a number of things we developed a community of practise as a methodology and encourage that. The community of practise tends to be an informal network of people who have a common interest of some kind… where people have particular interest in a particular topic so they can share questions and lessons learned that is very useful (Company Specialist, Rolls Royce). In Sage, a more informal approach to communities is evident: The organic route is the best one for us and Sage works very well with the sort of contacts and networks between people within Sage and that is one of the strong points (Product Manager, Sage).

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Learning activities are very important in developing and renewing DC of innovativeness because it is the medium through which skills, experiences and knowledge are shared and used to renew and develop and improve upon processes and innovations. When learning activities are conducted, it provides information about competitors, customers and partners and it creates a common understanding of the operations, processes of the companies and where to find information for work related activities. Members of the participating companies learn through processes and tools and as result of the continuous process of creating, capturing and utilising knowledge created from the four activities the companies are equipped with current information, knowledge and skills they need to adapt to the changing dynamic environment. Through knowledge creation, capturing, transfer and utilisation the firms develop the ability to do generative and adaptive learning as well as the ability which leads to the development of DC of innovativeness.

4.6.

Outcomes of the Process—Innovativeness

As a result of the continuous process of developing DCs, the companies acquire and learn explicit and tacit knowledge, know-how and skills, intellectual capital, new processes, experiences, efficient technology and innovations to improve their existing capabilities and to develop new ones. The process therefore leads to the development and renewal of DC of innovativeness, which when applied appropriately enables firms to conduct business successfully and sustain their competitiveness in dynamic markets. DC of innovativeness is an integrative and transformational DC. Innovation is usually an outcome-oriented measure, such as “new product success” (Menguc and Auh, 2006) whilst innovativeness captures the firm-level orientation toward innovation (Hurley and Hult 1998; Menguc and Auh, 2006). Innovativeness is the firm’s inclination to engage in innovative behaviour that departs from the normal ways of doing things in the firm (Hurley and Hult

25

1998). Innovativeness is a firm valuable resource, and socially complex resource that is not easily transferable or imitable by other firms (Hult and Ketchen, 2001).

Thus, the DC of innovativeness identified in this study is the ability of the firm to continuously create value through learning new ideas and initiatives in such areas as HR activities, R&D and NPD, organisational processes, structures and procedures, financial and business models, relationships with external firms and partners, suppliers, resellers, and customers as a platform for producing current and future products and services. This therefore involves the integration of resources to bring in new products, procedures and processes into the firm, which assist them to meet the changes and remain competitive in their business. The following quotes illustrate innovativeness in the two participating firms: So there is the ability to sense those requirements and document those and convert them into the appropriate software, product package or service package (Director of Products, Sage). Clearly the ability to monitor and control product development such that the products mature when they have to be and you deliver what you promise to deliver on time. That is particularly important because it can be a nice distraction if you have an existing problem in the business and you are unlikely to tackle that problem and renew your skills then you will be missing out on opportunities in the future (Business Development Manager, Rolls Royce).

The process of creating DCs does not end with development of the DC of innovativeness rather this is continually reviewed in the light of new challenges in the internal, operating, and remote environments. The DCs are then renewed and new ones developed through the process identified.

26

5. CONCLUSIONS, IMPLICATIONS AND LIMITATIONS The first aim of this study was to empirically identify, examine and explain how DCs are created at the organisational-level. This aim was achieved through the collection and analysis of data and the incorporation of extant literature to identify the processes through which DCs are created in high technology companies.

The findings illustrate that DCs are developed through internal developmental approaches that involve activities such as continuous in-house innovation and human resources activities and through external approaches of collaboration and acquisition. The decision to develop DCs is both purposeful and emergent and hence the internal and external strategies are both planned and emergent. The process of creating DCs is a continuous evolutionary process in the firm. The impact of these processes leads to the development of DCs. The literature suggests that organisations use either planned or emergent strategies (Ansoff, 1965; Allison, 1971; Quinn, 1980; Mintzeberg, 1994). The findings suggest that to develop DCs involves a hybrid of planned and emergent strategies. The data suggest that to develop DCs, managers have to use both planned and emergent strategies. In addition to planned strategies, the companies have to maintain a degree of flexibility to allow strategies to emerge during the operations of the companies which fosters generative and adaptive learning. It also allows companies to take opportunities that arise in their organisations. This is consistent with the understanding of strategy creation and implementation as adaptive (Mintzberg and Waters, 1985).

The second aim, which is the most important contribution of this study, is the development of a theory of the process of creating DCs, which is grounded in empirical data. The findings contribute to an understanding of the phenomenon of creating DCs through the 27

conceptualisation of ideas and patterns grounded in empirical data. This theory therefore can be used to analyse issues of creating DCs.

The substantive theory (Figure 2) developed from the empirical data comprises a series of iterative and simultaneous activities for creating DCs. The process of creating DCs is enabled by specific conditions, strategies, approaches and activities that lead to the development and renewal of the DCs in the firms. The theory portrays managers developing DCs both directly and indirectly through the process of developing and renewing capabilities by way of combining tangible and intangible resources and performing activities which are patterned and repetitive. These include: in-house innovations; business scope, structural and firm innovations, HR activities; recruitment, developing and training people, knowledge creation, capture and articulation, collaborations with partners and customers and acquisitions of other businesses capabilities and skills through purchasing of firms. As a result of these processes firms develop difficult to imitate DCs such as; innovativeness, market orientation, ability to manage people, knowledge collaborations and acquisitions which set them apart from other firms when used appropriately to perform to achieve and sustain competitiveness in dynamic markets. Developing DCs requires resources; both tangible (physical and financial) and intangible (human, structural and relationship capital) resources were identified as the key resources that are important for developing and renewing DCs.

The theory demonstrates that developing DCs involves constant surveillance (environmental scanning) of internal, operating and remote environment to identify areas that prompt changes. The theory uncovers several factors which prompt firms to develop DCs. More importantly constant surveillance of the business environment ensures that firms are on alert and are developing the right DCs to be flexible enough to adapt to changes in the operating

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and remote environment. Although these factors are commonly known in business cycles, the aim of the ‘conditions’ as part of the theory is because developing and renewing DCs is a continuous process and involves change. As such, it is important that firms keep continuously aware of their internal, operating and remote challenges by making every effort to find out the dynamics of the marketplace. Without understanding the market organisations would not know which DCs are important and therefore worth developing to remain and improve competitiveness in markets.

The theory suggests that if managers want to develop DCs to achieve or sustain competitive advantage it is important that they develop DCs in all areas of the organisation focusing on people, technology and process. This involves developing multiple DCs and in different areas of the firm. This is because building DCs involve organisation wide efforts, continuous improvement, learning and adaptation. Most of the literature identified above although provided some support in sensitising the grounded data, however, it concentrates mostly on one function of the organisation. The assumption that organisations create DCs based on one function and the same process can be used to create other DCs is challenged by the data and supports the conclusion of Dougherty et al (2004, p.34), who note that “we focused on just one DC, and do not think that the same structuring underpins all capabilities”. DCs are seen as a firm’s bundle of transformation processes (Coombs and Metcalfe, 2000), which focuses on how to organise many activities over time. Thus, the research of a single DC activity such as new product development or how to carry out post acquisition activities effectively in organisation is a necessary but not sufficient condition to create all DCs to achieve competitive advantage. A closer examination of the theory developed reveals that it encompasses all aspects of developing DCs; it is market, people and technology driven. The assumption is that bundling all the various part of developing DCs in a coherent fashion is indeed consistent with the approach to discover the principles behind the potency of DCs.

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The theory suggests that with a continuous balanced combination of key resources and activities in an integrated organisational approach makes it possible for organisations to develop a difficult to imitate set of DCs. These DCs, when used appropriately, set companies apart from others and hence they experience superior performance due to the use of the flexible and adaptable DCs to adapt to changes in the environment.

The analysis and the integration of the categories and concepts in extant literature revealed that this research shares similar findings with other research work on DCs and hence the theory is consistent with existing conceptual and empirical research on DCs in different disciplines. Although the theory shares similar findings with existing literature it is worth noting that, the practices and best practices identified as DCs in some of the research work for example Eisenhardt and Martin (2000) were actually not DCs themselves but rather a means through which DCs are developed and renewed. Again, human resource activities were found lacking in most of the extant literature on how DCs are created but the present findings shows that HR activities are very important in the development and renewal of DCs.

Although the theory developed is consistent with extant literature, this substantive theory developed is a coherent theory, which comprises of different strategies and activities to develop the full organisational DCs to help sustain competitiveness in dynamic environments. It was important to develop a theory of the process of creating DCs so that managers understand the components of the process, the underlying bases and resources that are observable and can be replicated when the aim is to develop DCs.

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5.1. Implications of the Study This study makes several contributions to theory. First, it identifies empirically the process of creating DCs, which has received limited scholarly attention in the strategy and management literature. Second, the study identifies and explains the key determinants and organisational activities for creating DCs. Finally, this research is significant since the process of creating DCs is lacking in empirical evidence, this research therefore contributes to the theoretical extension and the body of knowledge of the DCs concept, by extending current research on DCs, routines and firm specific processes for creating DCs.

Several implications for managers arise from this study. The success of firms operating in turbulent environments depends on how managers balance resources, value creation and flexibility to adapt to changes in the environment to enhance their products and services. This study demonstrates that one of the ways to achieve this is through the continuous development of integrated DCs. The model emphasises both internally and externally focused approaches to developing DCs. Hence, it is important to note that while firms’ tend to emphasise the process of creating DCs internally, it is equally important for managers to place emphasis on the creation of DCs externally as both sources play significant roles in the development process of DCs.

This model will help managers to understand the components of the process, the rules, the underlying bases and resources that are observable and can be replicated when ones aim is to develop DCs to achieve or sustain competitive advantage. The process of creating DCs was derived from practices and can assist managers in recognising what it is they do everyday that contributes to the creation of DCs. It gives them the opportunity to select and integrate the various processes appropriately to optimise the development of DCs in their respective

31

firms. This study therefore contributes to practitioner understanding and informs managerial practice on how DCs can be developed, the main determinants, activities and the resources that are important.

Learning activities were identified as an intervening mechanism for developing DCs. The organisational learning literature suggests that, DCs are created through learning. The grounded theory confirms this but emphasise that the activities that form part of the process for creating DCs cannot lead directly to DCs creation without learning occurring. Hence, learning is an important aspect of developing DCs and managers have to learn from the activities they undertake.

5.2. Limitations of the Study and Directions for Future Research Although the substantive theory presented is by far the most empirically researched coherent process of developing DCs in the strategic management literature, the study has some limitations. First, this study was based on a grounded method approach to formulate the substantive theory from data collected in two companies in technology industries. Despite the fact that this methodological approach provides an opportunity for rich data collection and theory development, it imposes some limitations on the findings. Second, generalising the findings may be limited to the technology industry (Glaser and Strauss, 1967; Strauss and Corbin, 1998). Third, although the theory developed is verified through constant comparison with data collected throughout the research, the theory is not tested because theory testing is not part of the grounded method process. Fourth, the findings from this research did not confirm a theory but created a substantive theory, which is limited to companies participating in this research. Hence, the requirements for follow-on study using

32

the model to test the findings and evaluate the theory and also provide in-depth detail on the phenomenon.

This study has established the key constructs in a framework of the process of creating DCs. For future research it will serve as a basis for generating a formal theory of DCs and also for testing the process of creating DCs on a wider scale. Although the theory identifies six DCs from the process, because DCs research is underdeveloped companies undoubtedly may possess additional DCs which were not found in the companies studied and thus present opportunities for new studies to identify other DCs and illustrate how they are created to enhance the process model of DCs creation. The theory does not evaluate the relationship between DCs and performance, which is another substantive area and therefore a fertile ground for further research to test the relationship between DCs and performance of firms to achieve competitive advantage.

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Priem, R.L. & Butler, J.E. (2001), "Is the resource-based "view" a useful perspective for strategic management research?", Academy of Management review, vol. 26, pp. 22-40.

Quinn, B. (1980). Strategies for change: logical incrementalism Homewood, Illinois: Irwin. Rindova, V.P. & Kotha, S. (2001), "Continuous "morphing": Competing through dynamic capabilities, form, and function", Academy of Management Journal, vol. 44, pp. 12631280. Rouse, M.J. & Dallenbach, U.S (1999), "Rethinking research methods for the resources of sustainable competitive advantage", Strategic Management Journal, vol. 20, pp. 487-494. Strauss, A.L. & Corbin, J. (1998), Basics of qualitative research:

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Figure 1

Analysis Process

Substantive area (Process of creating DC) Preliminary literature review-theory Selection of grounded theory method

Entering the field Theoretical sampling

Constant Comparison method (Analysis data)

Field research 1- open sampling Data

Open coding

Guides literature review

Concept – properties/dimensions

Additional slice of data Additional slice of data

Concept – properties/dimensions Concept – properties/dimensions

Additional slice of data

Field research 2 – relational sampling (additional slices of data)

Concept – properties/dimensions

Axial coding- Relations (preliminary theory) Concept

Memo

Concept Concept

Theoretical saturation No

Field research 3 –discriminate sampling (additional slices of data)

Concept

Selective coding-Concept checking, refine, prioritise Core category

Sub category Theoretical saturation Yes

Sub category

Sub category

Sub category

Abstract categories and contextualise in the literature Contributes to extant literature

Present core categories and model developed

Informs /relate substantive theory to literature

Review and evaluate 37

Figure 2

The Process of Creating Dynamic Capabilities Improve and Sustain Competitiveness Developing and Renewing DCs

Strategies Planned

Emergent

Decision of Development and Renewal Approach (Internal/External), Activities and Resources to be used

Key Resources Tangible Physical and Financial

Activities Internal In-house Innovations Human Resource Activities

Intangible Human capital Structural capital Relationship capital

External Collaborations Acquisitions

Learning activities

Outcomes DCs Innovativeness Market orientation Ability to manage: Human resource Knowledge Collaboration Acquisitions

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Table 1

Explanation of the Components of the Model

Components

Explanation

Improve/ Sustain competitiveness

To remain competitive firms have to meet certain requirements, which are, internal and external.

Improve and sustain competitiveness was used to explain the reasons why firms renew and develop DCs.

Internal: Improving efficiency of the firm to respond to external pressures External: varies from customer requirements, industry legislation, government legislation requirements, technical requirements and competition To meet these requirements firms need certain capabilities hence the continuous development and renewal of DCs.

Developing and renewing DCs The process through which firms continuously renew and develop their DCs. The various processes through which this is achieved are stated and explained below.

This include; strategies for developing DCs, decision of development and renewal approach (internal/external), activities and resources to be used and the outcome. Each of these aspects of this component are explained below

Strategies

Vary from:

These are the strategies adopted to renew, develop and maintain DCs. It explains the nature, types, variation, amounts and the degree of intensity of the strategies adopted.

Planned to emergent strategies

Decision on development and renewal approach The decisions firms make whether to invest in the DCs, skills, processes and technology within or outside their firms to develop DCs

Planned: Business strategy, product and capability documents Emergent: Business intelligence, generative and adaptive learning. Varies from internal to external developmental approach Internal: Invest in developing DCs within the firm External: Invest in developing DCs from external sources

Key resources

Varies from tangible to intangible resources.

To develop DCs there are certain resources that are required to facilitate the development of DCs.

Tangible resources Physical: Infrastructure, technology Financial: Internal to external money, good systems Intangible Human capital: Right people, intellectual capital, integrated teams Relationship capital: Good relationship, brand equity Structural capital: Supportive culture, transformational leadership, time, good reputation and processes.

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Components

Explanation

Activities

Internal Approach

These are the actions that are adopted for developing and renewing DCs. They involve a patterned approach for renewing and developing the DCs. This major component explores the type of activities, the location, the duration, amount, intensity and degree of usage, focus, variations, rationales and benefits of the activities toward creating DCs. These activities vary from developing and renewing DCs focusing on people, technology and process. It also involves codifying and articulating the skills and knowledge created during the process to develop and renew DCs.

In-house innovations Business scope innovations: year to year investment in technology, R&D, experimentation and new product and market developments. Organisational innovations: Processes and process improvements activities, business models and firm structure. Structural innovations: New business models to support customers and partners, and horizontal mergers and acquisitions. Human resource activities: Recruitment, people development activities and training. Learning activities: knowledge creation, codification and articulation and utilisation. External Approach Collaborations Strategic alliance: Formation of joint ventures Partnerships: Formation of university technology centres, research associations External networking: Direct and third party Direct: Customers, suppliers, partners and competitors Third party: Committees, conferences. Acquisitions Technology and skills Acquisitions

Outcomes

Dynamic Capabilities

The outcome of all the activities above creates skills, knowledge, technology that leads to the renewal and development of DCs. This when used appropriately gives firms the ability to perform certain functions better than their competitors. This then moves the static firm-level capabilities to higher order capabilities (DCs).

Innovativeness Market orientation Ability to manage: Human resource Knowledge Collaborations Acquisitions

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Appendix 1

Examples of codes generated from the line by line coding

Codes

Codes

Codes

Many routines for renewing

A level of throughput of PHD

Intangible resources

capabilities

students and research

Recruitment

Direct entry graduates

Replenish with new graduates

Very best graduates

Recognised industrial experts

World-class experts

Some specialists grown

Tangible resources

Identification of a technology

internally

capability need

A high level of competence

Basic current technology

Recruitment from universities

Quality standards

Core skills and capabilities

External development

Specific departments

Financial resources

Internal development

Certain skills

Physical resources

Few experts

Faster track training

Specific components

UTPs set up 10 or 15 years ago

Rotation

Knowledge creation

University technology centres

Occasionally

Knowledge capture

Acquired companies

Competitors

Knowledge articulation

Time to time

Graduate training scheme

Continual flow

Best university for each specialism

Professional anchor

Long term- ten years

Traditional graduate recruitments

Right type of skills

Right age profile

A tied customer/excellent university

Experience data systems

Close beneficial relationship

Entry of students into RR based

solutions

Strive for excellence

on research

A lot of strength in

We provide the funding to the

Transfer and sharing of best

developing people

universities

practices and skills

Acquisitions integrated over

Partner firms in supply chain

Focus on engineering,

time Partnership

techniques & manufacturing Human resource activities

Very high in developing all staff

Key resources

Planned and emergent strategies

Strive for excellence

Freedom to innovate

Proactive and planned

Finance processes

Use of partner companies

Developing people to be better

Quality processes

Improve the process

Skills declining in necessity

Specialist and new people

41

Codes

Codes

Codes

Different universities

Keep a very open mind

Internal recruitment

Recruitment market

Target that group

Move people around

Professional journals

Skills change

Refresh people

University journals

Continuous improvement yearly

Structural innovations

Identify need

Growing skills

Acquisition of technology

Capability skill owners

Particular specialists

Organisational innovations

Design a new graduate

Identified by engineering directors

Use of supply company

recruitment programme

or chief engineer

expertise/skills

Identify need

External recruitment

Business scope

Partners

Joint ventures

Flows and emerges

People development

Improve and sustain

Plan ahead and look ahead

activities

competitiveness

Training

Collaborations

Learning activities

Structural capital

Leadership

Human capital

Relationship capital

Innovativeness

Market orientation

Legislation

Competition

Customer requirements

Organisational culture

Acquisition management

Collaborations management

Decision on development and renewal approach

Improve and sustain competitiveness

42

Appendix 2: Example of developing the concept of HR activities

HR Activities Properties Type

Dimensions Recruitment

Dimensions Training

Graduates

Experts

Approach

Planned/emergent

Planned /emergent

Quality of people

Very best graduates

Recognised industry experts

Amount

A lot of graduates

Few industry experts

Rationale

Specific skills

Degree of usage

Specific to general skills Traditional /direct entry Internal /external recruitment Used frequently

Continuity

Continuous use

Type of medium

Capability owners/ HR department

Types Location

Traditional and faster graduate training Leadership training Management training Planned/ emergent

Personal development Career development Identification of potential high flyers

Excellent and available training programmes Many training activities

Excellent people development activities Many people development activities Develop and retain intellectual capital Formal and informal

Occasionally

Skills for Current to future roles Formal to informal training Internal to external training Frequently used

Used from time to time Capability owners/ HR department

Continuous use/ long term Capability owners/ HR department

Direct recruitment External recruitment

People development

Planned/ emergent

Internal Frequently used Continuous use/ long term Capability owners/ HR department

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Appendix 3: Integration of major and sub categories to develop the theory Developing and Renewing DCs

Causal Conditions

Strategies

Development Approaches

To remain and improve competitiveness due to: Legislation Competition Customer’s demands Internal efficiency

Planned

Internal

Emergent

External

Major category

Activities

Resources

Outcome -DCs

In-house innovations

Tangible Financial

Innovativeness

HRA Activities

Physical

Ability to manage:

Collaborations Acquisitions Learning activities

Intangible Human capital Structural Capital

Market orientation

Human resources Knowledge Acquisitions Collaborations

Relationship capital

Sub categories

44

45