Strategic options‐based framework for management of dynamic capabilities in manufacturing firms

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.

Citation

Kyläheiko, K. and Sandström, J. (2007), "Strategic options‐based framework for management of dynamic capabilities in manufacturing firms", Journal of Manufacturing Technology Management, Vol. 18 No. 8, pp. 966-984. https://doi.org/10.1108/17410380710828280