Strategic options-based
framework for management
of dynamic capabilities
in manufacturing firms
Kalevi Kyla
¨
heiko and Jaana Sandstro
¨
m
School of Business, Lappeenranta University of Technology,
Lappeenranta, Finland
Abstract
Purpose – The purpose of this paper is to launch a dynamic strategic framework for a
manufacturing firm for the digital age. The paper’s dynamic capabilities- and strategic options-based
framework is comprised of the following key issues: how to sense the weak signals at the customer
interface and how to formulate them as strategic options; how to exercise these options in the (often)
intangible assets markets that are imperfect or even non-existent; how to appropriate and/or share
strategically relevant productive knowledge in order to obtain competitive advantage (CA) over the
rivals, (iv) how to recognize the opportunities and threats of the underlying industrial structure,
especially the economies of scale and scope and network externalities; and how to proactively
reconfigure and reshape the existing knowledge base and capabilities in order to sustain the CA
obtained.
Design/methodology/approach – The paradigm of creating CA is opened up in the context of
knowledge-based engineering and digital manufacturing. The Porterian five forces model, the
resource-based view and especially its dynamized extension, the dynamic capability view, are used as
theoretical starting points. The modern strategic technology management literature will be
complemented by means of the concepts of strategic options and related flexibility issues. Some
illustrative examples will be offered as well.
Findings – In the author’s view, the primary sources of sustainable CA in the digital manufacturing
can be captured from active asset selection (strategic investments in both tangible and intangible
assets), and efficient orchestrating of the global value net in “thin” intangible assets markets. The main
determinants of CA are: the competitive nature of external environments, supply and demand
conditions of the industry (economies of scale and scope and network externalities), renewal capacity
of the organization, the dependence on complementary co-specialized resources and capabilities, and
the strategic role of the appropriability regime.
Originality/value – This paper tries to capture the critical elements of creating sustainable CA in
the context of digital manufacturing and it is considered to be useful for strategic decision-makers. The
modern technology strategy management literature is synthesized in our framework and it tries to
make the issues more applicable to the strategic management of the companies.
Keywords Manufacturing industries, Strategic manufacturing, Transaction costs,
Competitive advantage
Paper type Research paper
1. Introduction
Manufacturing companies have gone through three distinctive phases as for their
earnings logic and business models during the last century. The first one started in the
1920s and was based on the effective utilization of electricity. This period has later
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1741-038X.htm
JMTM
18,8
966
Received November 2006
Revised May 2007
Accepted June 2007
Journal of Manufacturing Technology
Management
Vol. 18 No. 8, 2007
pp. 966-984
q Emerald Group Publishing Limited
1741-038X
DOI 10.1108/17410380710828280