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Dynamic or Static Capabilities? Process Management Practices and Response to Technological Change

Authors


  • *Thanks to Jamie Eggers and Dan Levinthal for helpful suggestions on earlier versions of the manuscript, to Giancarlo Mott for research assistance, and to the Mack Center for Technological Innovation at the Wharton School for financial support. The author also greatly appreciates the thoughtful comments of the editor, Anthony Di Benedetto, and two anonymous reviewers.

Address correspondence to: Mary J. Benner, Management Department, The Wharton School, University of Pennsylvania, 2010 Steinberg Hall - Dietrich Hall, Philadelphia, PA 19104-6370. Tel.: (215) 746-5719. Fax: (215) 898-0401. E-mail: benner@wharton.upenn.edu.

Abstract

Whether and how organizations adapt to changes in their environments has been a prominent theme in organization and strategy research. Within this research, there is controversy about whether organizational routines hamper or facilitate adaptation. Organizational routines give rise to inertia but are also the vehicles for change in recent work on dynamic capabilities. This rising interest in routines in research coincides with an increase in management practices focused on organizational routines and processes. This study explores how the increasing use of process management practices affected organizational response to a major technological change through new product developments. The empirical setting is the photography industry over a decade, during the shift from silver-halide chemistry to digital technology. The advent and rise of practices associated with the new ISO 9000 certification program in the 1990s coincided with increasing technological substitution in photography, allowing for assessing how increasing attention to routines through ISO 9000 practices over time affected ongoing responsiveness to the technological change. The study further compares the effects for the incumbent firms in the existing technology with nonincumbent firms entering from elsewhere. Relying on longitudinal panel data models as well as hazard models, findings show that greater process management practices dampened response to new generations of digital technology, but this effect differed for incumbents and nonincumbents. Increasing use of process management practices over time had a greater negative effect on incumbents' response to the rapid technological change. The study contributes to research in technological change by highlighting specific management practices that may create disconnects between firms' capabilities and changing environments and disadvantage incumbents in the face of radical technological change. This research also contributes to literature on organizational routines and capabilities. Studying the effects of increasing ISO 9000 practices undertaken in firms provides an opportunity to gauge the effects of systematic routinization of organizational activities and their effects on adaptation. This research also contributes to management practice. The promise of process management is to help firms adapt to changing environments, and, as such, managers facing technological change may adopt process management practices as a response to uncertainty and change. But managers must more fully understand the potential benefits and risks of process management to ensure these practices are used in the appropriate contexts.

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