Understanding internal conditions driving ordinary and dynamic capabilities in Indian high-tech firms

Abstract

Organizational capabilities are the cornerstone of a firm's competitive advantage. However, considerable ambiguity exists on the contributions of ordinary and dynamic capabilities. This study examines the relative contributions of ordinary and dynamic capabilities to firm performance. Based on a survey of 260 Indian high-tech firms, we find that in those firms that are in early stages and the very last stage of their life cycle, ordinary capabilities outperform dynamic capabilities in improving firm performance. However, for firms in the middle two stages of their life cycle, both types of capabilities contribute equally. Similarly, for small and medium enterprises (SMEs) ordinary capabilities are more important than dynamic capabilities. However, large firms are served equally well by both types of capabilities. Our findings indicate that the role of the internal organization has been underrated in previous research that has focused primarily on the external environment to understand ordinary and dynamic capabilities contributions.