Exploring the Role of IS in Dynamic Capabilities

Exploring the Role of IS in Dynamic Capabilities

Stephen Duhan (Oxford Brookes University, UK), Margi Levy (University of Warwick, UK) and Philip Powell (University of London, UK)
DOI: 10.4018/jsita.2010040102

Abstract

Resource-based theory suggests that firms develop idiosyncratic capabilities that contribute to sustainable competitive advantage when they are valuable, rare, inimitable and non-substitutable. The successful use of information systems (IS) and information technology (IT) has been linked to improved firm performance. Recent literature suggests that a deeper understanding of what capability means in practice may be gained from a disaggregation into component competences and resources. A better understanding of the role of IS/IT in business level capability may be achieved through a fuller articulation, both of the capability itself, and the contribution of IS/IT, together with an evaluation of the effectiveness in delivering sustainable competitive advantage. A dynamic capabilities perspective explains the way firms adapt capabilities to changing market environments over time. This paper explores these propositions through an exploratory case study using a framework derived from a resource-based and systemic view of the firm. The analysis suggests a dynamic Capability Development Model through which the implications and potential for IS and IT over time may be understood. The paper addresses three issues. First, it offers a better articulation of what capability concepts mean in practice. Second, it takes a disaggregated understanding of capabilities, and third, it sheds light on the dynamics of capabilities.
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Resource-Based View And Strategic Management

In the resource-based view of the firm, competitive advantage derives from the acquisition of resources and their deployment through organisational capabilities to bring about desired strategic outcomes (Andreu & Ciborra, 1996; Grant, 1991; Wernerfelt, 1984). These capabilities develop in idiosyncratic and path-dependent ways (Leonard-Barton, 1992) and consequently are difficult to transfer between firms. Typical examples of capabilities are Sony’s competence in miniaturisation of consumer electronics (Prahalad & Hamel, 1990), Caterpillar’s after-sales support and service (Javidan, 1998) and competence in materials (Rangone, 1999). This ‘resource heterogeneity’ and ‘resource immobility’ results in some firms being more competitive than others in a given industry (Collis & Montgomery, 1995; Mata et al., 1995). The sustainability of competitive advantage is dictated by the extent to which the firm's resources are found to be a valuable, rare, inimitable, and non-substitutable (VRIN) (Barney, 1991; Javidan, 1998; Rangone, 1999). Ashurst et al. (2008) state that ‘while resources are clearly a critical element of the RBV, there is growing recognition that resources, per se, do not create value. Rather, value is created by an organisation’s ability to mobilise, marshal, and utilize these resources through the application of capabilities and competences’ (p. 354).

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