Technological innovation: a resource-based view

# 3.2 Core and strategic capabilities

Core capabilities are discussed more fully in Section 4 but it is worth briefly elaborating further here, using the example of robotic surgery, by asking the question: how would the hospital know whether this is a capability of strategic importance? First, we might consider the environment in which a hospital operates. Even within a predominantly state-operated health service, such as the NHS in the UK, competitors such as private healthcare providers exist. In addition, the funding of a hospital department may also be based on specific funding regimes. In this case, the use of novel surgical techniques may indeed be of strategic importance because they create the potential to process more patients, with fewer complications, while consuming fewer hospital resources. Conversely, and importantly, once all hospitals in the public and private sectors possess the technology to carry out robotic surgery, there will be little competitive advantage between organisations possessing the same capability. At this stage the capability is likely to become a strategic necessity – required even to qualify as a certain type of healthcare provider.

## Further examples of capabilities

It is clear from the brief discussion of a technological capability that capabilities consist of combinations of organisational and technical components. It is unsurprising, then, that as the body of research into technological capability grew it became increasingly evident that while possessing this capability is important, focusing on this alone is not sufficient to explain why some organisations are successful at innovation and others are not. The study of organisational capabilities has therefore broadened and deepened, leading Menguc, et al. (2014, p. 315) to conclude that: ‘The RBV has proven to be an instructive theoretical framework for explicating how sources of competitive advantage (e.g. resources, assets, and capabilities) lead to marketplace positional advantage (e.g. innovation and marketing differentiation or cost leadership).’

At this point it is worth reiterating my earlier contention that the RBV approach has far wider utility than simply commercial organisations. However, as innovation is typically seen as of most importance to commercial enterprises, it is unsurprising that ‘firms’ and ‘companies’ – commercial entities – are the focus of attention rather than organisations more generally. Nevertheless, you should keep the caveat about wider applicability in mind as we begin to explore the nature and significance of capabilities in greater depth. Before moving on, however, the following list is useful because it illustrates how the RBV has extended in scope (as well as spawning new terminology) since its early focus on technological capability.

- Core capabilities (e.g. Prahalad and Hamel, 1990)
- Organisational capabilities (e.g. Chandler, 1992)
- Operational capability (e.g. Miller and Roth, 1994)
- Dynamic capabilities (e.g. Teece et al., 1997)
- Product development capability (e.g. Subramaniam and Venkatraman, 2001)
- Marketing capabilities (e.g. Kotabe et al., 2002)
- Information technology capabilities (e.g. Santhanam and Hartono, 2003)
- Managerial capability (e.g. Saloman, 2009)
- Intercultural capability (e.g. Gómez-Schlaikier, 2009)

Note that the terms used above appear to indicate the existence (and study) of individual capabilities as well as combinations, many of which focus on the internal processes and activities of organisations. Additionally, in most cases the terminology used is descriptive enough to provide us with a clear indication of the nature of that capability. The exceptions are core and dynamic capabilities. The former has already been noted (i.e. a strategic capability). The latter are not discussed further in this course.

OpenLearn - Technological innovation: a resource-based view
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