understanding. These understandings include aspects of the organisational context, performance expectations, power relations and organisational identity. The organis- ational context concerns what an organisation does and why, as well as who are the critical stakeholders. The power relations allow participants to understand the hierar- chy and their status within the organisation. This theory assumes a time delay between routines and their development of connections and shared understandings and rather like the same notion in social theory needs to be worked on over time. A model provid- ing a synthesis of the organisational routine literature is shown in Figure 5.10 (Cohen and Bacdayan 1994; Feldman and Rafaeli 2002). A useful anology to describe organis- ational routines was expressed vividly by an anonymous reviewer as follows:
‘Routines are like ruts in a well-travelled road. They do not exactly determine where the next wagon will go, but neither do they merely describe where past wagons have gone.’
(Pentland and Rueter 1994)
Chapter 5 / organisational learning 145 been considered as ‘routines to learn routines’, similar to the notion of deutero-learn- ing (learning to learn). The following definitions of dynamic capabilities illustrate some of the variations in the field:
‘Firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments.’ (Teece et al. 1997)
‘The firm’s processes that use resources – specifically the processes to integrate, reconfigure, gain and release resources – to match and even create market change. Dynamic capabilities thus are organizational and strategic routines by which firms achieve new resource configur- ations as markets emerge, collide, split, evolve, and die.’ (Eisenhardt and Martin 2000)
‘A dynamic capability is a learned and stable pattern of collective activity through which the organization systematically generates and modifies its operating routines in pursuit of improved effectiveness.’ (Zollo and Winter 2002)
So are organisational routines and dynamic capabilities synonymous concepts? The key distinction appears to be the level of change encountered as a factor of market dyna- mism. In stable or static environments and market conditions, organisational routines predominate, characterised by stable patterns of behaviour. The routines can be com- plex but are predictable and build on existing knowledge. They evolve slowly over time and exhibit qualities of single-loop learning. However, in moderately dynamic or highly volatile markets, the use of organisational routines can prove hazardous in their auto- matic response to changed stimuli. Organisations can learn to adapt their routines to the changed circumstances, which leads to the development of dynamic capabilities. If this does not occur, core competences can become core rigidities (Leonard-Barton 1992).
The fine line between organisational routines and dynamic capabilities arises due to models that highlight similar stable and predictable modes of activity for each phe- nomenon (Zollo and Winter 2002). In this conception, dynamic capabilities can be viewed as modified operating routines following predictable mathematical arrange- ments, as shown in Table 5.2. The primary distinction is systematic learning, which implies a stable pattern of learning not dissimilar to single-loop learning. What happens in highly volatile market conditions when organisations cannot rely on sys- tematic learning and existing knowledge? Do organisations fall back on their old tried and trusted learning mechanisms in the vain hope of achieving desired outcomes?
Experience accumulation is perceived as occurring from learning investments aimed at developing a collective understanding of action–performance linkages. A principal aspect of the learning process is ‘knowledge articulation’ when groups of people come together in a variety of circumstances such as meetings and debriefing sessions and make their understandings and interpretations of a situation explicit.
Table 5.2 Dynamic capabilities (adapted from Zollo and winter 2002)
dynamic capabilities = Systematic learning + organisational routines
Systematic learning = experience accumulation + Knowledge articulation + Knowledge codification
This does not imply that there needs to be agreement within the group, but through a process of dialogue and discussion, a shared understanding is developed. Given that much of the knowledge is likely to be tacit, this process of externalisation is important to make the knowledge explicit. Knowledge codification as part of the systematic learn- ing allows further reflection on existing routines to help understand which routines work, which don’t work, and why (Zollo and Winter 2002). Knowledge codification may take the form of developing manuals, decision-support systems and blueprint guides of best practice.
Eisenhardt and Martin (2000) provide a clearer distinction between organisational routines and dynamic capabilities. They suggest that in stable and moderately dynamic market conditions, collective organisational activity resembles traditional predictable routines where managers rely heavily on their existing tacit knowledge. However, in high-velocity and volatile markets, organisational activity tends towards dynamic capa- bilities where managers rely much less on existing knowledge due to the ambiguity of the situation and more on situation-specific new knowledge. In these uncertain envi- ronments, the dynamic capabilities are composed of simple routines consisting of very few rules and a greater tendency towards improvisation. Flexibility of response becomes an important determinant. Dynamic capabilities possess a number of key attributes (Eisenhardt and Martin 2000):
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● equifinality – firms develop similar dynamic capabilities even though they may have different starting points and take unique paths;
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● commonality of dynamic capabilities – such routines are transferable between contexts and industries;
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● idiosyncrasy – firms may have commonalities in their dynamic capabilities but differ in their levels of detail (firm specific) which leads to competitive advantage;
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● prototyping – often used to test and gain new knowledge quickly through small losses and feedback;
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● real-time information – to allow adjustment and adaptation to occur due to changing circumstances;
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● multiple options – parallel consideration of alternatives to allow managers to act con- fidently and quickly;
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● path dependent – a firm’s investments in certain routines historically tend to con- strain its future behaviour.
Dynamic capabilities can lead to competitive advantage if they are valuable, rare, inimitable and non-substitutable (VRIN attributes). However, it has been argued that they are necessary, but not sufficient, conditions for sustainable competitive advantage (Eisenhardt and Martin 2000). Their idiosyncratic nature may give them short-term competitive advantage, but this cannot be sustained as they are substitutable due to their equifinality and commonality characteristics.
Chapter 5 / organisational learning 147