Organizational change and dynamic capabilities: how a firm transforms its resource base

Abstract

Dynamic capabilities are increasingly being used to explain how firms leverage their resource base over varying levels of market dynamism yet numerous questions remain. One dilemma surrounds how firms might engage in routinized, path dependent activities while simultaneously exploring new opportunities. Another question surrounds the strategic role required of key firm decision makers in bringing about differential performance. Using an in-depth case study (2007 to 2012) on the airline Spanair, we ask the following question: How can a firm leverage its resource base to bring about deep purposeful change? In our findings we identify a hierarchical framework with two first order dynamic capabilities, goal directing and renewing, and one second order capability, transforming. We contribute to the literature by demonstrating, how a link between the goal directing capability of senior directors and the transforming capability, create a strategic goal directed path used to guide and monitor performance. We also explain how the link between the goal directing and renewing capabilities develops an important bridge between path dependency and path creation in dynamic capabilities. With our renewing dynamic capability (adding, integrating, transferring, and shedding of resources) we show how the systematic use of internal as well as external resources can bring about deep change. Furthermore, we demonstrate how the goal directing and renewing capabilities jointly enable transformative growth, particularly in times of heightened internal and external environmental turbulence.