The Nature and Dynamics of Organizational Capabilities. . - book review

Organization Studies, Nov, 2001 by Alessandro Nuvolari

Giovanni Dosi, Richard R. Nelson and Sidney G. Winter (eds.): The Nature and Dynamics of Organizational Capabilities. (Book Reviews)

2000, Oxford: Oxford University Press. 389 pages.

This book, edited by Dosi, Nelson and Winter, contains 13 papers written by scholars who have already produced important contributions to the burgeoning body of literature on the capabilities of firms. In the introductory chapter, the editors provide an excellent critical survey of recent research in this area. In particular, they illustrate how studies on firms' capabilities have greatly benefited from the stimulating convergence of various research streams, namely: evolutionary economics, strategic management, innovation studies and business history. The editors also notice that, so far, research efforts have been based on quite a flexible conceptual framework constituted by a number of largely overlapping notions such as 'organizational capabilities', 'core competences', 'dynamic capabilities', etc. Of course, such terminological proliferation can be somewhat of a necessity in a newly developing field, however, I agree with Dosi et al. that future contributions should make use of existing concepts (when ne cessary, refined and further specified), rather than resorting to the creation of new notions. In this context, the editors' clarification of existing terminology, in their introduction, is particularly welcome. Hopefully, it might act as a first step towards 'consolidating' the conceptual framework guiding future research efforts in this area.

The first part of the book contains four papers dealing with firms' capabilities and organizational learning at what we might call the 'micro' level. They are all based on very detailed case studies. In Chapter 1, Narduzzo, Rocco and Warglien examine the creation of technical 'problem-solving' capabilities (conceived as particular 'bundles' of routines) in a newborn cellular phone company. In Chapter 2, Argote and Darr deal with the processes that ensure that knowledge originating from learning-by-doing is progressively incorporated into institutionalized organizational practices so that personnel turnover does not result in the disruption of firm capabilities. Argote and Darr consider the case of a pizza fast-food franchise, which, given the particularly high turnover rate is indeed well suited for their purposes. The study carefully combines very detailed qualitative and quantitative evidence providing interesting new insights on the procedures of organizational learning. The subsequent chapter, by Szulansk i, is a case study of the duplication of 'organizational routines'. Szulanski analyzes an example of the replication of organizational routines in the banking sector. Chapter 4, by Flaherty, on semiconductor manufacturing, concludes the first part of the book. Flaherty considers how the establishment of structured 'limits to inquiry' help to provide an essential focus to learning-by-doing processes and, in this way, to facilitate mastering a highly complex manufacturing technology.

The second part of the book is devoted to 'dynamic capabilities' (those capabilities that allow firms to reconfigure their competences in reaction to a rapidly changing external environment). In Chapter 5, Pisano deals with R&D capabilities. Each R&D project, produces not only the new technology which was targeted in the project, but also makes new knowledge available for new projects. Dynamic capabilities are those that permit firms to leverage this knowledge to achieve effective learning across projects. Pisano's study is based on detailed evidence at the project level in the biopharmaceutical sector. Chapter 6, by Henderson and Cockbum, complements Pisano's paper, providing a quantitative empirical investigation on the determinants of R&D productivity in the pharmaceuticals sector. They conclude that the capability of integrating knowledge effectively across firm's boundaries and across different fields and product areas (which they term 'architectural competence') is one of the main factors underlying R&D success in this sector. Finally, in Chapter 7, Appleyard, Hatch and Mowery present two detailed case studies of the introduction of new processes in semiconductor manufacturing, trying to outline the capabilities which were essential for success in this sector.

The third part of the book contains three studies on the automobile industry. In Chapter 8, Coriat reconstructs the creation of the lean production system at Toyota. In his contribution, Coriat emphasizes the 'dual' nature of organizational routines: they are problem-solving devices (hence they are the fundamental component of firms' capabilities) but, at the same time, they are also governance procedures regulating the resolution of conflict inside the firm. In Chapter 9, Fujimoto presents a detailed case study of the changes introduced in the Toyota production system during the late 1980s and early 1990s. In Chapter 10, as a means of investigating which factors affect the effective 'duplication' of organizational capabilities, Kenney and Florida examine the 'transplantation' of Japanese production systems to the United States.