The evolutionary theory of a firm :: Business, Innovation

Focusing on a ï ¬ rm level analysis, RBV suggests that differences in ï ¬ rms’ capability are primarily the result of resource heterogeneity across ï ¬ rms (Peteraf, 2006). Firms that can accumulate resources and capabilities that are rare, valuable, no substitutable, and imperfectly imitable will achieve an advantage over competitors (Barney, 1996). A distinction is normally made between resources and capabilities, in that "resources are stocks of available factors that are owned or controlled by the organization and capabilities are an organization’s capacity to deploy resources" (Freiling, 2008). Resources tend to be tradable in markets and can be divided into tangible assets, such as ï ¬ nancial and physical capital, and intangible assets, such as human and organizational capital (Barney, 1986). By contrast, capabilities reside in routines that are intrinsically intangible and embedded in the ï ¬ rm, and thus cannot be traded on factor markets (Kogut & Zan der, 1992). Drawing on the evolutionary theory of a ï ¬ rm, the innovation capabilities approach to a ï ¬ rm emerged as an extension of RBV. Speciï ¬ cally the processes to integrate, reconï ¬ gure, gain and release resources, use resources to match and even create market change (Eisenhardt & Martin, 2000). Moreover, they are vital to gaining and sustaining a competitive advantage in industries where both technology and the market change (Verona & Ravasi, 2003). As such, they are considered as antecedent organizational and strategic routines that enable managers to acquire resources, which they then modify, integrate, and recombine to generate new value creating strategies. Eisenhardt and Martin (2000), and Zahra and George (2002) maintain that a ï ¬ rm’s routines or processes and organization culture and information technology advance can form unique innovation capabilities which allow the organization to make strategic changes that give it the ï ¬â€šexibility to operate in in novation markets. Lawson and Samson (2001) applied an innovation capabilities approach to the investigation of innovation. Many authors highlighted the differences between an organization’s well established or mainstream activities and its innovative or new stream activities (Badawy, 1993). Lawson and Samson (2001) proposed a model that operationalizes this global innovation capability as seven elements: vision and strategy; harnessing the competence base; organizational intelligence; creativity and ideas management; organizational structure and systems; culture and climate; and management of technology. The concept of innovation capabilities proved useful in some other marketing areas. Previous studies considered their use in the analysis of a ï ¬ rm’s international expansion (Grifï ¬ th & Michael, 2001; Grant, 1996), while Hart and Sharma (2004) analyzed the capabilities required to address the challenges of globalized and rapidly changing markets.