Prof. Dr. VeitWohlgemuth
University
of Applied Sciences HTW
Katharina Hoehne
THE
TENSION BETWEEN DYNAMIC CAPABILITIES AND PATH DEPENDENCE: EFFECTS OF
STAKEHOLDER MANAGEMENT
Dynamic capabilities, an organization’s “capacity […]
to purposefully create extend or modify its resource base”[15:
1] appear to be highly relevant to maintaining a competitive advantage. The
concept of path-dependence can be characterized as complementary, but opposite
to dynamic capabilities, namely the firm’s inability to adjust but rather to
stabilize processes and routines based on prior events and decisions [23].
Somewhat surprisingly, research focused on dynamic capabilities only rarely
draws on insights from the organizational path-dependence literature (e.g. [7][12][17]). This might however be supportive as the concept
of dynamic capabilities is not fully developed yet and progress could lead to
major breakthroughs in research and practice [14]. We intend to merge the
conversations by investigating the purposeful effort of organizations to
position themselves in a continuum between the two extremes of total
adaptability and a lock-in situation. In our paper, we argue that stakeholders
might play a crucial role as they heavily influence organizational sense-making
and the goals pursued [11]. Our specific research questions are: 1) How and to what degree
does the common purpose, shaped by stakeholders, affect the organization’s
position in the continuum between a dynamic or path-dependent direction? and 2) How can an organization purposefully change its
positioning through the active stakeholder management?
Our understanding of dynamic capabilities is
influenced by Weick’s[26] work on flexibility and common purpose. Following his
outline, total flexibility of an organization is unlikely to exist for long as
it has a disruptive effect on the organization. Instead, even a generally
flexible structure must entail some stable elements that create a sense of
continuity and identity needed to maintain the organization and give direction
to employees. This might for example be a shared
purpose or vision that influences behaviors and preferences [13]. Nevertheless,
the common purpose might also be a boundary condition for dynamic capabilities.
Everything beyond the common purpose might either be a strategic blind-spot or,
in case it is considered, it might risk the organization’s survival by
jeopardizing the shared ground. Despite conceptualizations in the literature
that point towards a more or less universal adaptability (e.g. [25]), we
therefore hold the view that adjusting to every situation is more of an ideal
state at the end of a continuum rather than a real life phenomenon. To be
clear, we still argue that an organization can come very close to that ideal.
However, instead of attributing dynamic capabilities in empirical research,
which has been criticized as unfeasible by Arend&Bromiley[3], we suggest
attributing degrees of proximity to fully effective dynamic capabilities.
The lock-in
situation described in the path-dependence literature, whereby an organization
becomes unable to change or adjust due to prior specialization and a
time-dependent, gradually reduced scope of action [23], could be placed at the
opposite end of this continuum. Ceteris paribus, the common ground arises and
is confirmed among all involved actors, and group think could be a consequence
[10]. Behavior “outside the box” would be disruptive and the organization is
hence “locked in.”
Nevertheless, the purpose of an
organization is not necessarily stable itself, but it can be subject to change [6].
What creates and changes the common purpose and the goals of an organization
lies therefore at the very heart of the flexibility/rigidity debate.
Stakeholders create and give meaning to organizations (e.g.[11])
and might be a crucial driver of an organization’s common purpose. From a
stakeholder theory perspective, a firm can be described as "an
organizational entity through which numerous and diverse participants
accomplish multiple, and not always entirely congruent, purposes” [9: 70].
Thus, objectives that are commonly desired among stakeholders define the
purpose of an organization. Stakeholders are however not equally powerful as
not all of them provide critical resources to the organization [20], legitimize
their activities [18][22], or strongly affect their
success (see e.g. [5]). Powerful stakeholders can serve as facilitators and
even as a source for innovation [4][21], but might
also demand isomorphic behavior [8].
Our paper is designed as a discussion
paper. We plan to first discuss how stakeholders can influence the common
purpose resulting in a more or less extended scope of (legitimized) action and
how this could be tested empirically. We thereby draw on the path-dependence
and dynamic capability literature to merge the research conversations and expose
what they respectively might have left unexplored so far. Moreover, we assess
how stakeholder management such as the identification of, as well as the
communication and negotiation with most relevant groups, might serve as a tool
for organizations to influence the common purpose [1][16] and navigate internal
capabilities into a more dynamic or more path-dependent direction. Both
directions are possible. To provide an example: Innovative organizations can
use communication tools such as discussion platforms, opinion surveys, or
stakeholder dialogues to capture environmental signals early. These inputs can
serve as a valuable source for the organization’s sensing [24]. A proactive
stakeholder management therefore appears to avoid path-dependence and support
dynamic capabilities. However, as interests among stakeholders differ, some
might not be willing to adjust and seizing procedures [24] can become prolonged
and complex. Organizations tend to prioritize interests here due to
resource-dependence [20], stakeholder power [19], or inertia. A consistent
prioritization of stakeholders, in turn, limits dynamic capabilities and is
more likely to lead to path-dependence.
We seek to contribute to the dynamic capabilities
literature by explaining the role of stakeholders as potential drivers for but
also possible opponents to the development of dynamic capabilities.
Investigating stakeholder management as an instrument to change an
organization’s position from being rather path-dependent to being rather
dynamic might provide an additional microfoundation
to the literature on dynamic capabilities, which desperately seeks studies to
resolve debates on the foundations of the construct [2]. A better understanding
of the relationship between stakeholder management and organizational purpose
might also be valuable for practitioners that are willing to develop dynamic
capabilities and stay off the beaten path. Nevertheless, we also emphasize that
managers should be aware of the fact that overambitious flexibility may threaten
the organization’s survival by jeopardizing the common ground.
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