Technological innovation: a resource-based view
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# 2.2 Innovation capabilities

There are competing views and theories as to how to explain this and other key characteristics of innovation, of course. This course provides an introduction to one approach that has become increasingly popular over recent decades: the dynamic capabilities approach or perspective (also referred to as a framework). Put briefly, this approach argues that as new bases of competitive advantage have become more significant across ever more globalised markets, so old ways of examining competition – such as Porter’s ‘Five Forces’ framework (Porter, 1985, cited in Teece, 2011) – have become increasingly redundant because they are ‘not up to the task of revealing the dominant logic of value capture in most new industries, as well as many of the old.’ (Teece, 2011, p. 4). Consequently, firms (and organisations more generally, it can be argued) need to develop a much more comprehensive view of the environment(s) in which they do, or seek to, operate. For example, the ‘components’ of these environments stretch well beyond buyers and suppliers. They include local labour markets (particularly for skilled workers), legal and regulatory systems, education systems (particularly the university sector), banking and finance, and national, regional and pan-national political and governmental systems and situations (e.g. the EU, OECD, etc.).

This course begins by explaining the genesis of the capabilities approach – which lies in the resource-based view (RBV) of organisations – before moving on to discuss resources, competences and capabilities. A word of warning about RBV terminology is in order however. The terminology can be confusing, with different terms used to describe similar things, and the same things labelled differently across the literature. Unfortunately, this is the nature of the RBV/capabilities beast, as it is with other topics across not just academia but management consulting and journalism, for example. As such, it is a feature of the subject that cannot be avoided when citing or drawing on work from across the field. Nevertheless, effort will be made to mitigate this issue wherever possible.

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