The Essence of Dynamic Capabilities and their Measurement

Abstract

The growing popularity of explaining firm performance through dynamic capabilities has motivated plenty of conceptual development in the field. However, empirical approaches to measuring dynamic capabilities have so far not been under comprehensive scrutiny. The authors; purpose is to assess the extent to which different ways of measuring dynamic capabilities in quantitative studies correspond to the theoretical essence of the concept, and develop recommendations for future research. They find that four types of operationalizations have been used: (1) managers’ evaluations; (2) financial data; (3) company's experience, actions and performance; and (4) managers’ or employees’ experience, actions and performance. Based on their analysis, the authors provide eight recommendations for future research that relate to identifying ordinary and dynamic capabilities, avoiding common method bias, taking into account the quality and fitness rather than the quantity of dynamic capabilities, and acknowledging the cumulativeness of dynamic capabilities through the use of longitudinal data. They conclude that refining the dynamic capability operationalizations would help to formulate competing hypotheses and to increase the theoretical precision of the field.