The objective of this chapter is to extend the literature on dynamic capabilities (henceforth DC) to incorporate a more holistic model of human behavior, which includes micro-foundational elements, such as emotion, motivation, and identity, so far kept outside the debate around the evolution and consequences of DCs. The differential ability of firms to manipulate resources and routines to adapt to market and stakeholder expectations is in fact key to our understanding of competitive advantage (Teece, Pisano, and Shuen, 1997) and of strategic initiatives and processes such as mergers and acquisitions (M&A), product development, and knowledge management (Eisenhardt and Martin, 2000; Zollo and Winter, 2002). The construct itself has been capturing a growing attention from influential scholars of different fields coming from a wide variety of backgrounds and contributing to a more fine-grained understanding of change dynamics within organizations (Di Stefano, Peteraf, and Verona, 2010; see also Teece, Chapter 23 in this volume).
In a particularly influential statement for the development of the debate, Teece (2007) calls for a better understanding of the micro-foundational aspects of DC, echoing similar invitations from both critics (Felin and Foss, 2005) and contributors (Zollo and Winter, 2002) to the DC approach. In an attempt to provide a partial response to these calls, our intention is to move beyond definitional debates in the already rich landscape of DC literature (Bromiley, 2009) and to shift the focus towards the development of a more complete model of antecedents, consequences, and boundaries to the effectiveness of DCs. The inclusion of theoretical linkages of this sort appears to be important at this time not only because they are at least partially overlooked in our current understanding of capability dynamics. It is important also because empirical inquiry is still largely missing in this central domain for strategic management research, in part due to the missing articulation of these causal links.
In the effort to address this challenge, we propose a model that can accommodate the diverse nature of DCs with respect to the objects of change that they aim to act upon and can better serve the call for a better understanding of micro-foundations of strategy. In doing so, the model will include antecedents at both the organizational and the individual levels of analysis, as well as behavioral, cognitive, and emotional components of the change outcomes, which will then influence various aspects of performance. To illustrate the conceptual arguments, we will refer to cases and illustrative examples derived from the product development, the M&A, and the social/environmental sustainability contexts, since these are all processes that require, for their successful deployment, the reconfiguration of operating processes, structures, and resources, that is (by definition) the exercise of DCs as understood by some of the leading authors in the field (Helfat et al., 2007; Teece et al., 1997; Zollo and Winter, 2002; Winter, 2003).
In the remainder of this chapter we will first review the notion of DCs and then develop a theoretical model with the holistic traits described above. Finally, an agenda will be proposed for future work on both the theoretical and empirical fronts.