Micro Foundations Of Routines And Capabilities Business Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Routines and capabilities are important part in number of management fields, notably international management, technology strategy and management, and organization studies but at micro-level, the origins of routines and capabilities are not researched properly as per Arogate and Ingram. "A "micro-foundation" is a set of local-level access and structure through which a social course is caused." (Daniel Little, 2008). From this research we will understand why micro-foundations are very important? And how micro-foundations increase the knowledge from the base as well as tell how components interacts with each other.

The research was carried out by Teppo Felin, Nicolai J. Foss, Koen H. Heimeriks and Tammy L. Madsen. They carried out the research by studying from the basis, i.e. from the micro-level, where they understand how micro-foundations of routines and capabilities can play a vital role in any organization. And then they moved towards the findings of the reasons behind micro-foundation's analysis in general as well as in scientific terms. And finally they expanded the definition of micro-foundation by segmenting it into three basic categories, i.e. individuals, processes and interactions, structure.

Micro-foundation also affects the development, maintenance and changes in routines and capabilities. The micro foundation of routines and capabilities include components that can be called as base, such as, individuals, processes, structures and interactive effects. As the study on micro-foundation goes on, the researchers established that assumptions about the uniformity is unsustainable and inaccurate and is heterogenic in nature.

While going further, the researchers tried to make common definition about micro-foundations of routines and capabilities. They described routine as repetitive pattern which is collective phenomenon. And capabilities as a high level routine that when combined with input flows produce output of particular type. The researchers further say that though routines and capabilities are different aspects but they are linked. In case of critically analyzing, the researchers took respondents in the research who were employees and people at managerial level. Also the researchers took them by random sampling and they were near about 1300 auto-manufacturing employees. They took them because their research was dependent on the micro-level study of routines and capabilities. For this they need to study people who were working in a firm, and observe them (their behaviour and characteristics) as in a group as well as an individual, furthermore researchers also observe the cognitive and dynamic capabilities of the managers in different routines.

By doing their research on individual's behaviour, characteristics, psychological aspects, also on their interactions and their way of doing work shows that the outcome will be different if the observation is taken from one person to other. The proof for the difference in the result is that the researchers marked that individuals have different belief, goals, interests and different human capital.

Since the research was purely on the micro-foundation of routines and ability, and also the researchers were unable to provide answers to some of the important research questions. The researchers show some biasness related the micro-foundation of routines and capabilities as they didn't show the theoretical and empirical evidences but showed three categories of micro-foundations and their interactions.

From the research paper, we came to know that the key findings are motivation is necessary for the organizational capability, individual's experience may diverge or change the routines and is a source of stability, and how interaction between two individuals may affect the performance of routine. And also the artefacts may affect the evolution of new routines. And from these key points, the researchers were still unable to provide solutions to some of the important questions like whether they should focus on individuals and aggregation or more simply on historical patterns and evolution. But they came to a conclusion that micro-foundations constituents i.e. individuals, process and interaction and structures are the base of organizational capabilities and routines.

As reported by the findings, we can say that capabilities and routines of an organization depends upon the individual's behaviour and actions as well as some characteristics of the managers. We can say that though the findings help in drawing some conclusion about the micro-foundation of capabilities and routines but they are not sufficient to come to a definite conclusion as some questions were still there in black box and hence the conclusion is not fully justified.

In the end, we can say that the research helped a lot in gaining knowledge as the findings showed proof of how individual's experience, behaviour and actions can change the performance of routine and how the managers can affect the capabilities of an organization. Furthermore the findings showed that there are many aspects which can help in understanding the micro-level criteria of routines and capabilities. The findings also tells that why a micro-foundations view is required and how it can be informed to work on organizational and competitive heterogeneity.

Reference:Felin, T, Foss, N, Heimeriks, K and Madsen, T. (2012). Micro-foundations of Routines and Capabilities: Individuals, Processes, and Structure. Journal of Management Studies. 49 (8), p1351- 1369.

Little, D. (2008). Microfoundations of social practices. Available: http://understandingsociety.blogspot.co.uk/2008/05/microfoundations-of-social-practices.html. Last accessed 13th Mar 2013.

Loasby, B. (2002) Knowledge, institutions and evolution in economics, New York, Routledge.


Journal of Management Studies. 5 (2), p205- 222.

Foundations and Micro-foundations of Dynamic Capabilities


The research tells about how a firm uses its resource for growth and competition. And through its capability with changing environment including obstacles, it tries to compete among other firms and able to make growth in the competitive area. The research is about the discussion on the concepts of interpretation and coordination as intrinsically relational economic activities, in which inter-subjectivity can both confine and potentialize the rationality of agent. The main aim of this research is to propose a theoretical-methodological discussion of the evolutionary approach to a firm's capability, particularly to the analysis of dynamic capabilities (Teece, Pisano and Shuen, 2002). The research was carried out by Victor Pelaez, Ruth Hofmann, Marcelo Melo and Dayani Aquino from the Department of Economics, Federal University of Paraná, Brazil.

The research was carried out by taking cognitive approach and evolutionary approach. In cognitive approach, all perceptions are hypothetical and therefore must be taken as interpretations of an event based on an individual's knowledge. The evolutionary approach states that a firm's competitiveness is taken to be a function of its capabilities to integrate and reconfigure its resources to adapt to changes in the environment and that recognition of environment is no longer stable. Furthermore the research was discussing about the theoretical micro-foundations that will help to understand the decision-making process of agents. The research was further divided into three segments of inter-subjectivity involving the methods of co-ordination and interaction of the firms. And in the last, the research was about the discussion on the capacity to assess the firm's capabilities and to recognize that economics and the economy do not represent a dichotomy between theoretical and empirical realms.

In the research, the researcher selected the respondents through random sampling and the respondents were the employees and managers of the firm which were helpful in decision making processes. Also the research tells about the competency can be achieved if the iterative method is used with the same respondents and decision making will get more enhanced as the presence of limited knowledge about the firm will then get diminished. Which means that the research will be different if it is done in iterative form. Also there will be greater use of theory to gain knowledge and greater be the influence on capability.

There were many authors and scholars who were defining the term "capability" using different concepts, like Loasby (2002) clarifies the term "capability", by linking it to the potential and the limits of human cognition, which for the science of economics has implications for the crucial problem of decision-making by agents with limited conditions for rationality. But the researchers took the concept worked by Nelson and Winter (1982), that capability is associated with the routines, that companies adopt to organize their repertoire of activities and of information processing, showing a form of biased conclusion. From the research, we came to know that dynamic capability is required by the firms to compete in changing environment and to co-operate internally and externally to the resources, also the experience and theory of the individuals may help the firm to be in progress. As knowledge is recognized as a small input, the agents' limited rationality is presented with subjective elements that make up the image and the expectations of what they believe they can achieve.

In the end, we can say that the findings are correlated with the conclusion, and we get the knowledge that the decision making process depends not on the subjective interpretation of individual but on inter-subjective interpretation of his environment. In other words, this inter-subjectivity allows the ideas to be established for the communication between the subject and object of research


PELAEZ, V, HOFMANN, R, MELO, M and AQUINO, D. (2009). Foundations and Micro-foundations of Dynamic Capabilities. Journal of Management Studies. 5 (2), p205- 222.

Teece, D., G. Pisano and A. Shuen (2002) "Dynamic capabilities and strategic management," in

G. Dosi, R. Nelson and S. Winter (eds) The Nature and Dynamics of Organizational

Capabilities, Oxford U.P., Oxford, pp. 334-362



Building Micro-foundations for the Routines, Capabilities and Performance Links

The research was done by Peter Abel (Department of Industrial Economics and Strategy Copenhagen Business School), Teppo Felin

(Organizational Leadership and Strategy Marriott School, Brigham Yuong University), and Nicolai Foss (Center for Strategic Management and Globalization

Copenhagen Business School).The research is mainly about why it is important to understand the strategic management at micro-level other than macro-level. As there is no mechanism that work solely upon the macro-level, and routines and capabilities are complicated pattern of individual action and interaction, hence are best understood at micro-level. Also the research tells about how micro-foundation of routines and capabilities can affect the firm's performance.

The research was carried out in four steps, initially, the researchers modelled the micro-foundation of how routines can be effective in firm's performance, and then the research is carried on by enclosing the arguments in a traditional production function framework. The research was further studied in modelling production externalities and finally linked routines and capabilities by saying that a firm can be described as holding the capability to conceive a routine to the degree that it can repeatedly internalize such externalities. The researchers for their work on the performance by individual took some people who have certain skills at certain level of motivation. But in the research, they did not mark any specific number of individuals taken. The researchers showed a model of how individuals can affect the firm's performance along with formulae, which shows that the performance will not be uniform, as it is dependent on individual's motivated skills and its outcome.

The conclusion which the research gives is that, in strategic management research, the capability has seen virtually no attempts to build explicit micro-foundations and hence it is not clear of how macro-level construct will have an effect on firm's performance. Also, the key finding is that individual's actions and skills shows an effect on the performance of firm and how micro-foundation can be built and how routines can make their impact on the performance. And we can say that understanding of micro-level foundation is important because capabilities and routines can create their impact on the organization's performance.

The conclusion provided by the researchers on their findings is not fully justifiable as they were not able to prove some important points like how routines impact performance may be related to which routines are allowed to emerge and focus on prisoners' dilemma games. Also the researchers were not able to show how routines can contribute in shaping their recognition or importance in a firm and were not able to decide whether routines are emergent or designed entities.

In the end, the research helps us in understanding the importance of micro-foundation rather than macro-foundation of a firm's performance depending upon its own and its employer's capabilities and routines. Furthermore, the research shows us the knowledge of the issue of how to make micro-foundations testable and accountable to observed performance and how facts must be briefly raised including individual's motivational skill and its results.


Abel, P, Felin, T and Foss, N. (2007). Building Micro-foundations for the Routines, Capabilities, and Performance Links. Journal of Management Studies. 7 (2), p1- 23.

Dosi, G., R. Nelson and S. Winter (2002) "Introduction: The Nature and Dynamics of

Organizational Capabilities," in G. Dosi, R. Nelson and S. Winter (eds) The nature and dynamics of organizational capabilities, Oxford U.P., Oxford, pp. 1-22.



Journal of Management Studies. 49 (8), p1484 - 1505.

Dynamics of Organizational Routines:A Generative Model

Pentland, B, Feldman, M, Becker, M and Liu, P.

The research deals with the organizational routine's generative model and how the routines change over time. While going through the research, the researchers tried to explain the generative model and explained how this model demonstrate the variation in the pattern of action is necessary and how this model is linked to the dynamic capability. They showed that the generative model links the micro-level actions to the macro-level dynamics of routines. Researchers also explain how "actions" are important to organizational routines. The research was carried out by Brian T. Pentland, Martha S. Feldman, Markus C. Becker and Peng Liu.

The research about the generative model was carried out by exploration of the key concepts and their relationship to the foundation of organizational routines. After this part, the researchers tried to explain the generative model and then showed deep study on the four important processes in the routines. Finally, they gives some implication of how this model will be used in the dynamics of routines. Since the research moves around the generative model, the actions comes into role and are selected by normal distribution method from the set of given actions and are assigned with the costs. As the researchers carried out the research using relevant concepts and formulation, they observed that up to some level the measurement is approximately same and the qualitative parameters were same, but as the calculation goes further, the result was varying and there was large variation in dynamic changes.

From the research, some of the main findings which came forward are that routines are carried out by socio-material ensembles of actants that include artefacts, the difference between processes in steady state and processes contributing to change co-ordinates the difference between operational and dynamic capabilities (Helfat et al., 2007). Also, in organizational routines, path dependence is demonstrated in two ways (Schulz, 2008): within performances, and between performances. Furthermore, some other important key points which are to be noticed are transition matrix is associated to both the analysis of history as causal force and as observable outcome and the conditions can be used to see the likelihood of socio-material ensamble for action, routines form whenever specific array of actions are retained, a little random variation is sufficient to produce continuous drift in the patterns, smaller the value of retention, the faster the learning process will be and the learning curve will be steeper and the model shows that isolating or removing away from the character, quality and features of actors is not only feasible, it is also helpful for understanding routine dynamics. The researchers came to conclusion that routines can be created if the focus is on the actions. Also there is need of actant who can do work, but the researchers explained the phenomenon of routine dynamics by actions and their repetition over time, which also shows some biasness.

As per the researchers, they showed other areas where their research can be useful, like the inclusion of various options to the choice set (e.g., an action enabled by a new technology). Intuitively, new substitutes create opportunities for new tracks.

Summarizing the whole research, the research provides the knowledge that model suggests that examining the connection between explanations of stability and change based on patterns of action or practices and those established on disposition may help to understand the dynamics of routines and the pattern of action are important to determine any process. And with the help of model, any person can make moves like those made by economists.