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In the research conducted by Teece (2012), it has been stated that in order to institute and maintain advanced financial performance it is an essential requirement to have managerial or entrepreneurial private enterprise. This type of a management does not involve the practice and positive changes in the current routines and formation of new routines only. There are critical roles for entrepreneurial managers to transform the organization and shape or reshape the routines in the competitive and dynamic environment.
To integrate and adjust to the rapidly changing external environment the dynamic capabilities of a firm provides higher levels of competence which enables firms to make the best use of its internal and external capabilities. It helps the organization to determine the pace and degree to which the company's major resources can be put into alignment or realignment in order to comply with the requirements and prospects of business environment in order to produce better results that portrays a significant level of efficiency. In order to align resources both inside as well as outside the company, it needs to first align the resources both inside as well as outside the firm. With the growing trade across borders and in general, there has been rapid competitive responses and greater specialization due to the growth in importance of the Dynamic capabilities. In order to become more specialized and successful, businesses need to well align their strategies with other firms in order to achieve the desired goals and satisfy customer needs.
The significance of routines to common capabilities has been acknowledged. As far as the dynamic capabilities are concerned, the respective roles of routines and particular (non-routine) actions by upper management offer a rich and important area for research. Even if managers are often called on to plan and put into observation revolution, the approach in which this occurs can barely be considered entirely routine. Due to the challenges present in the industry where change and restructuring becomes important it challenges the notion that all dynamic capabilities can be diminished to specific routines of the firm.
There are differences in opportunities that may be available for small or large organizations. A small organization may lack the technological efficiency to frequently evaluate the potential opportunities present in the external environment. Complex corporate histories make the study of managerial dynamic capabilities difficult and challenging.
Even though managerial dynamic capabilities can to some degree be traced by making the use of large sets of date which can be best analyzed and examined through in-depth and thorough qualitative research. This experimental research is still said to be at an initial stage and opportunities flourish to excavate deeper into the connections between dynamic capabilities, individual or small group managerial actions, and long run firm performance. The research model of dynamic capabilities is also comparatively new.
Key Findings: dynamic capabilities that can be recognized to achieve greater compliance with the external environment, entrepreneurial management which is required to develop strategies to be competent, ordinary capabilities that are formed by routines of the organisation, organizational change and routines are highly interlinked and dependent.
A firm or entity's competitive edge is primarily developed and constructed by its conventionally developed capabilities which define a firm or organization's relative success and progress level. According to Katrin, H.N. & Alexander, M. (2009), in strategic management, the capability-based view highly emphasizes on explicit capabilities which are essential to achieve certain business aims or to achieve desired goals. An organization functions through underlying aspects comprising of capabilities and routines which helps perform the various activities and tasks. However organizational behavior is not merely determined or driven by the aforementioned factor but by a combination of external factors or social impediments which restricts its overall performance. Moreover stability and behavioral continuity are resultant factors of routines rather than organizational change. There are many approaches in order to comprehend organizational behavior, changes and the strategic factors that the changes are based on, which will be analyzed forthwith. The praxeological orientation allows one to focus on three aspects i.e. cognitive, creative and normative procedures of how each individual complies to and applies the organizational rules and knowledge.
Organizational routines are deemed to be a significant aspect in organizational analysis which helps accomplish a firm's given tasks and activities. Renowned scholars have asserted that organizational routines refer to a recurring pattern of actions executed by a number of people within an organization. Organizational routine helps create and maintain stability which enhances organizational performance and interaction. Furthermore routines are ramified into four phases of development comprising of interpretation and sense-making, coordination and negotiation, transformation and stabilization and elimination and unlearning. These phases are influenced by social practices which consequently are shaped, monitored and embedded by organizational practices.
Routines and capabilities are deemed as interchangeable in literature and the nexus between the two in context to knowledge and learning largely remains unknown. The notion of routines tends to be static by nature. There is a distinguished perspective or orientation pertaining to organizational routines in literature that catalogs the internal or action-related mechanisms of routines. In accordance to that view organizational routines have a dual nature. Firstly routines are considered to be the repeated social graces or corresponding behavior of each individual and simultaneously are the resultant factors of these activities. On the other hand, capabilities are defined as the conscious reflexivity or spontaneity of the people within an organization and their degree of impulsiveness towards a certain action or decision as stated by Katrin, H.N. & Alexander, M. (2009). Thus, reflexivity is a measure that evaluates the attainment of certain goals as well as the circumstances and consequences of predefined routines so that new routines can be promulgated within the organization if the older ones have become less credible or requires changes. The framework that describes the development of routines seeks to provide greater clarity of the research gap.
The four distinct phases mentioned previously constitute of explicit processes which are highly influential on the degree or level of reflexivity within an organization. Moreover it is also deemed as a significant and underlying feature of capabilities and in each of these phases, capabilities discharge or fulfill a particular function within the organization.
An organization or entity's progress, development as well as both internal and external growth are consequentially based upon two significant elements comprising of organizational routines and capabilities. This determines an organization's level of success and survival. According to Gong, Baker & Mine (2005, pp. 1-31), renowned personalities have introduced and endorsed the notion of routines within organizations as it leads toward synergy, coordination and increased productive efficiency. These routines provide certain guidelines which helps direct various task(s) in order to enhance the overall functioning of the organization by creating and maintaining stability. Moreover routines are deemed to be the underlying elements from which organizational capabilities are derived. In addition, routines are used in large complex organizations and established firms where they are considered as a hypothetical phenomenon which could be empirically verified. However new firms often fail to establish routines and/or capabilities which impedes its natural growth rate, hence we need to identify how and where do routines come from and their relationship with capabilities and other forms of organizational behaviors.
Routines and capabilities as well as the relationship that prevails between the two can be observed and identified through a detailed empirical investigation. This involves a thorough research in the form of quantitative and qualitative data through various sampling methods such as the stratified random sampling approach. Routines have been asserted as repeated patterns of actions within an organization whereas capabilities are built by organizations with the help of existential routines or in other words routines are the underlying and strategic factors that help in the creation of capabilities. A thorough and well defined explanation of organizational capabilities claims that an organization is considered to possess a capability when it can consistently and successfully attain given goals at a certain level of excellence as stated by According to Gong, Baker & Mine (2005, pp. 1-31).
In order to have a clearer comprehension of how routines and capabilities are developed, contradistinctive cases were observed and analyzed in order to derive realistic conclusions.
Upon the various researches gathered and observed, it was believed that a new firm's network can be deemed as a significant component of routines. This is because founders often encountered problems pertaining to the integration of routines such as those faced by Clone Right group of scientists. Networks therefore help create routines and provide immense help both to the founders as well as the people working in an organization.
Therefore the above narration clearly enlightens the reader as to what routines are, how they are created within an organization and what is the bifurcated relationship that exists between both routines and capabilities. Also it explicates the concept of routines as repeated patterns of action within an organization and how capabilities are derived primarily from the combination of it. Newly established firms often use or employ different behaviors from a spectrum of behaviors in order to meet new challenges and encounter the organizational disputes through it. As new firms do not have prior or pre-set routines to reconcile the issues they encounter, they voluntarily take any action that best befits the situation, is appropriate and available.
A micro foundations perspective is of immense significance when studying or researching organizations and organizational behavior. According to Felin, T. et. al, (2012), empirical investigation and research have yielded three basic and distinct components of micro foundations. These comprise of individuals, social processes and structure and design. The latter part of the narration shall enlighten the readers as to how each component has an effect on the routines and capabilities within an organization.
Routines and capabilities are significant elements which are an integral part of any organization, firm or institute. For instance routines help in evaluating and analyzing the degree of diversity and competitive edge that firms/organizations possess. Routines are also considered as one of the vital and crucial component in the sector or sphere of management. Moreover, routines and capabilities have been regarded as important and underlying aspects of management or organizational behavior. However, according to Felin, T. et. al, (2012), the fountainhead of routines and capabilities and the primary level origin of these constructs largely remain unexplored. In the process to study micro foundations one analyzes and catalogs a set of occurrences and a detailed explanation or causation of it. Secondly it identifies the whole process right from the primary stage i.e. creation, development, reproduction and management. Generically micro foundation is defined as a theory based detailed explanation substantiated by empirical investigation or evidence.
Routines refer to identifiable, recurring and common patterns of behavior or actions observed within an organization or firm. Additionally, routines are developed and observed collectively rather than individually. Furthermore routines comprise of two critically significant aspects i.e. ostensive and performative aspects. The former explicates the conventional or traditional perspective of routines i.e. the abstract concept of routines as a structure. The latter on the other hand explains the performance of a specific routine in a given time period. The amalgamation of both the ostensive and performative elements of routines helps us to catalog change and the level of transition within an organization. Moreover there exists a difference between routines and capabilities depending upon how rigid or lucid they are as stated by Felin, T. et. al, (2012). The former constitutes of a sequential pattern of actions whereby each action is undertaken in a particular manner or form. Also, some routines tend to be less rigid and more flexible as they allow for managerial discretion in implementing various strategies. Therefore the nature of a certain capability is subject to variance and tends to be distinguished as a result of managerial actions over a period of time.
In addition, there are two components that are considered as the micro foundations of routines and capabilities i.e. structure and design. Structures indicate or pose restraints over a certain action as well as the level of interaction that may or may not occur within an organization. Also both organizational structure and design helps in a smooth functioning of the organization and enables efficient processing of important information, dissemination of knowledge, sharing of ideas and greater expertise or proficiency within the organization. Thus the above data clearly explains the significance of micro foundations pertaining to routines and capabilities and how important a role they play in an organization.