A Focused Issue on Competence Perspectives on New Industry Dynamics: Volume 6

This focused issue (Volume 6) of Research in Competence-Based Management provides a number of research papers – both theoretical and empirical – on what we have characterized in the volume title as “new industry dynamics.” It also contains papers that might just as accurately be described as providing “new competence perspectives” on industry dynamics. In effect, this volume both applies existing competence theory to the analysis of new industry dynamics, and provides new conceptualizations for representing and analyzing industry dynamics that are now emerging in many industries and product markets. While much competence theory has been developed through analysis of micro-level phenomena in individual organizations, we expect that the papers included in this volume will help point the way to further development of competence theory relevant to the macro-levels of industry and product-market phenomena.

In this paper we extend established concepts of product and process architectures to propose a concept of organization architecture that defines the essential features of the system design of an organization needed to achieve an effective strategic alignment of an organization with its competitive and/or cooperative environment. Adopting a work process view of organization, we draw on concepts of product and process architectures to elaborate fundamental elements in the design of an organization architecture. We suggest that organization architectures may be designed to support four basic types of change in organization resources, capabilities, and coordination, which we characterize as convergence, reconfiguration, absorptive integration, and architectural transformation. We also suggest the kinds of strategic flexibilities that an organization must have to create and implement each type of organization architecture. We identify four basic types of strategic environments and consider the kinds of changes in resources, capabilities, and coordination that need to be designed into an organization's architecture to maintain effective strategic alignment with its type of environment. We then propose a typology that identifies four basic ways in which organizational architectures may be effectively aligned with strategic environments. Extending the reasoning underlying the proposed alignments of organization architectures with strategic environments, we propose a strategic principle of architectural isomorphism, which holds that maintaining effective strategic alignment of an organization with its environment requires achieving isomorphism across a firm's product, process, and organization architectures. We conclude by considering some implications of the analyses undertaken here for competence theory, general and mid-range strategy theory, and organization theory.

This paper describes how “pre-market activities” shape the competitive context. Such activities are neglected in both empirical and conceptual studies of strategic management scholars. Thus, pre-market activities have not yet been covered in the concept of the “competitive context.” Pre-market activities let firms collaboratively prepare for industry transition; firms also collaborate in standard-setting and gathering a shared view of future competition. Therefore, pre-market activities also shape next technologies’ business ecosystems where product offerings are systemic in their very nature. The author takes a Hayek–Schumpeterian economic perspective. In other words, markets are taken as the processes of making, integrating, searching, and destructing knowledge. Such a perspective is applied to competence-based theory because competences are built on knowledge in a broad sense.

Competence-based theory provides valuable insights in a business context characterized by global ecosystems, co-specialization, and asset orchestration. As the unit of analysis shifts from the individual enterprise to the ecosystem, pursuing proper competence building and competence leveraging activities considering both firm-specific and firm-addressable resources becomes a key issue in strategy development.

Based on the original concepts of the competence-based theory, this paper suggests that the competence space can be a useful framework when considering alternative ecosystem strategies. Competence-based theory, emphasizing the simultaneous pursuit of competence leveraging and competence building, provides an important complement to other dynamic perspectives on strategy, such as dynamic capabilities and ambidexterity. The paper also suggests considering the inclusion of aesthetic properties as an important part of competence-based theory.

This paper makes a contribution to the discussion on micro-foundations of dynamic capabilities – actions and interactions in organizations that enable continuous organizational renewal. More specifically, we propose the idea that dynamic capabilities of an organization are a positive function of corresponding dynamic capabilities of individual and collective actors in the organization. Further, we develop the assumption that not only individual acts of managers but also those of individuals and teams without managerial responsibility relate to dynamic capabilities of the organization. Following a holistic view, we also take into consideration empowering working conditions as an enhancing factor of this function. To examine these roots of dynamic capabilities, we use a multi-level model of competence provided by Wilkens, Keller, and Schmette (2006) that operationalizes the concept of dynamic capabilities provided by Teece (2007) on a concisely behavioral base. We investigated our hypotheses with a standardized questionnaire in a case study of a German plant engineering company with 112 participants and found primary support for our assumptions. Our results show an impact of individual dynamic capabilities on dynamic capabilities of the organization that is mediated by team dynamic capabilities. Psychological and social–structural empowerment moderated this relationship. A case-specific interpretation and implications for future research and practice are discussed.

Our economies are rapidly evolving toward being primarily service-driven, with information and communication as fundamental drivers for the service deployment. Strategic choices are increasingly driven by other parameters than the traditional goods-driven industrial type of economies. In this paper, the major drivers for making strategic choices in a competitive service economy are examined. It is shown how the competition in services based on information and communication technology (ICT) is competence-based. Competition aims at bringing additional value through services, but may also deploy specific techniques to stop value from leaking in particular business processes. Value creation and prevention of value leaks cannot just rely on the traditional material-based techniques, which are grounded in the strong tangible nature of the traditional economies. Today ICT-based services involve creative combinations of technologies, resources, and assets to answer as well as anticipate the growing demand for flexible solutions that create sustained added value. In this paper, the particular role of imperfections in service systems is explored, extending the well-known theories of information imperfections. Imperfections are not always solved but are sometimes even maintained in favor of sustained competitive advantage. Various ways to realize service rent are discussed with extensive examples. The concluding part of the paper points to some crucial service configuration issues, including the need for a sufficient degree of corporate-wide standardized service components and interfaces to address the growing demand for agility in competence-driven markets.

Trends in the car and aircraft manufacturing industry showed an evolution in the configuration and management of the production network. For instance, the aerospace manufacturing industry tended to be a closed system, competing on scale of production and focusing on maximization of own profit. Nowadays the automotive companies are developing open systems under the influence of globalization, outsourcing, and co-creation of value. Doing this with suppliers causes a shift of value from the focal firm to the supply chain, creating a value levering position for the so-called large-scale system integrator (LSSI). The leverage of value on suppliers introduces the value-leverage capability of the LSSI company. The capability of the LSSI to balance continuation, conception, and configuration is crucial for (long-term) profitability and competitive position. To express the value-leverage capabilities, the authors propose the variables “turnover per employee” (T/E), “research and development per employee” (RD/E), and “profit per employee” (P/E), whose (inter) relationship determines the capabilities.

The purpose of this paper is to identify the sources of variation in firm performance. This is one of the cornerstones of strategy research, i.e. the relative importance of industry and firm-level effects on firm performance. Multilevel analysis is well suited to analyze variance in performance when the data are hierarchically structured (industry segments consist of firms, firms operate within the context of industry segments). The Belgian industry studied is a service industry that consists of about 25 electrical wholesalers. Data were collected from 20 firms during the period 1998–2003 from responses to a questionnaire sent to all the firms in the market. The sample in the data set covers more than 95 percent of the market (in sales), as the missing firms were just fringe competitors. The results show that firm effects explain most of the variance in four performance variables. That bears out the importance of each firm having its own specific, idiosyncratic resources and competences. The explanatory power of firm effects varies by about 30–40 percent while the intra-industry effect explains around 10 percent of the variance. Even though firm effects are dominant, intra-industry effects explain a significant portion of the variance in firm-level performance. The firm effect is smaller than in previous studies. The firm effect varies across the performance measures: firm effects are higher for returns on assets than for profit margins. The industry segment effect (or intra-industry effect) is more independent of the dependent variable. The industry segment effect is in line with previous studies on the strategic group effect. Top managers should carefully choose and monitor the intra-industry domain they are in.