Management Research, vol. 6, no. 1 (Winter 2007–8), pp. 47–62.
© 2008 M.E.Sharpe, Inc. All rights reserved.
ISSN 1536-5433 / 2008 $9.50 + 0.00.
How do ﬁrms adapt to changing conditions and learn new
capabilities? This question has always been at the heart of
strategy. Research has established that ﬁrms frequently need to
update their capabilities but face signiﬁcant barriers to accom-
plish this goal. The evolutionary view of the ﬁrm emphasizes
the stickiness of routines, local search constraints, bounded
rationality, uncertain imitability, and causal ambiguity as
some of the barriers to the identiﬁcation and development
of requisite capabilities. Consequently, the more drastic the
change the more difﬁcult the adaptation (Siggelkow, 2001). In
this sense, evolutionary theory has been critical in identifying
constraints to adaptation.
Evolutionary theory has also been useful in identifying and
suggesting remedies for such constraints. Acknowledging such
constraints, researchers have termed the routines required for
adaptation as dynamic capabilities. Dynamic capabilities are the
mechanisms underpinning the creation, update, and renewal
of competences over time (Helfat et al., 2007; Teece, Pisano,
& Shuen, 1997). Dynamic capabilities are the antecedent orga-
nizational and strategic routines by which managers alter their
source base to generate new value-creating strategies (Eisen-
hardt & Martin, 2000; Helfat et al., 2007). More speciﬁcally,
dynamic capabilities are embedded in routine organizational
processes that guide the evolution of a ﬁrm’s resource conﬁgu-
ration and operational routines (Helfat & Raubitschek, 2000:
975; Nelson & Winter, 1982; Zollo & Winter, 2002).
One generally accepted aspect of these capabilities is that
they are externally focused activities (e.g., Ahuja & Katila,
2001; Karim & Mitchell, 2000). This external orientation
helps ﬁrms to break out of their routines and escape their path
dependency. Due to transactional hazards and market failures
associated with the trading in embedded resources (Capron,
Dussauge, & Mitchell, 1998; Dierickx & Cool, 1989), such
external exchanges often involve acquisitions and alliances—
both of these activities act as dynamic capabilities.
The theoretical assessment that dynamic capabilities allow
organizations to shape the often blind trajectory of adaptation
is not trivial. In particular, from an evolutionary perspective,
alliances and acquisitions are dynamic capabilities that lead
Roberto S. Vassolo is an associate professor in the Business Policy
Department at the IAE Business School, Universidad Austral. He
received his Ph.D. from Purdue University. His primary research
interests are in uncertainty, emerging economies, and adaptation.
Jaideep Anand is an associate professor of strategy and international
business at the Fisher College of Business, Ohio State University.
He has previously worked at Michigan, Ivey, and Wharton Schools
of Business. He has a Ph.D. from Wharton School, University of
Pennsylvania. His research is in the area of mergers and acquisitions
and strategic alliances.
AN EXAMINATION OF DYNAMIC CAPABILITIES
Is Evolutionary Theory Underdetermined?
ROBERTO S. VASSOLO AND JAIDEEP ANAND
ABSTRACT: Firms frequently need to update their capabilities in changing environments but face signiﬁcant barriers
to accomplish this goal due to the stickiness of their routines, local search constraints, bounded rationality, uncertain
imitability, and causal ambiguity. Under high levels of uncertainty, dynamic capabilities are often externally oriented,
involving acquisitions and alliances. However, nonunique but competitive predictions about the behavior of these capa-
bilities arise from the evolutionary theory. We test these competitive hypotheses analyzing portfolios of acquisitions and
alliances made by pharmaceutical ﬁrms in search of portfolios of biotech capabilities. The analysis of portfolios enables us
to better identify “common practices” in the pharmaceutical industry than using a transactional-level focus. We develop
implications for the evolutionary theory and for managerial practice.
RESUMEN: Las empresas frecuentemente necesitan actualizar sus capacidades frente a un ambiente cambiante pero a su vez
presentan importantes barreras para cumplir este objetivo debido a rigideces en sus rutinas, restricciones en la búsqueda,
racionalidad limitada, y ambigüedad causal. Frente a altos niveles de incertidumbre, las capacidades dinámicas se orientan
normalmente al exterior, incluyendo adquisiciones y alianzas. Sin embargo, de la teoría evolutiva emergen predicciones
múltiples y contradictorias respecto del comportamiento de esas capacidades. Aquí testeamos estas hipótesis competitivas
analizando portafolios de adquisiciones y alianzas hechas por empresas de la industria farmacéutica en su búsqueda de
portafolios de capacidades en biotecnología. El análisis de portafolios nos permiten identiﬁcar “prácticas comunes” en la
industria farmacéutica mejor que si analizásemos transacciones individuales. De allí desarrollamos implicancias para la
teoría evolutiva y para la práctica de los negocios.