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The rate and potential of capability development trajectories

Authors

  • Scott F. Rockart,

    Corresponding author
    1. Strategy and Entrepreneurship Area, Kenan-Flagler Business School, University of North Carolina, Chapel Hill, North Carolina, U.S.A.
    • Correspondence to: Scott F. Rockart, Kenan-Flagler Business School, University of North Carolina at Chapel Hill, CB #3490, 300 Kenan Center Drive, Chapel Hill, NC 27599-3490 U.S.A. E-mail: srockart@unc.edu

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  • Nilanjana Dutt

    1. Department of Management and Technology, Bocconi University, Milan, Italy
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Abstract

This paper examines differences in the rate and potential of firms' capability development trajectories. Capability development trajectories are the paths over which firms' capabilities change with experience and other activities. While prior research focused on factors affecting capability development rate (the fraction of the gap between a firm's current and potential capability eliminated with each unit of activity), we argue that capability development trajectories also differ in potential (the maximum capability level a firm could achieve through repeating a given set of activities over time). We develop and estimate a formal model of capability development, showing that larger underwriting projects lead to a lower rate of improvement toward higher potential capabilities, and derive implications for research on industry dynamics and the nature of competitive advantage. Copyright © 2013 John Wiley & Sons, Ltd.

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