Capabilities

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Dec 9, 2012 (4 years and 11 months ago)

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COMPETENCIES, CAPABILITIES
AND TIME

TOWARDS A DYNAMIC
KNOWLEDGE
-
BASED THEORY OF
VALUE


DIME Network, Pisa

9 November 2010

Nick von Tunzelmann


Evolutionary perspective via Capabilities


Throughout this presentation I shall be taking what to my way of
thinking is an evolutionary perspective on the production and
distribution of knowledge


Start with statics before building up to dynamics


time is an issue I
have variously discussed at the (1) short
-
term level of ‘real time’; (2)
long
-
term level of secular change, based around education and
learning; (3) medium
-
term level of leads and lags in the system


long
waves, business cycles, etc.


I shall be doing so through the concepts of ‘capabilities and
competencies’, often deemed to be synonymous, but I regard as quite
different


Just think of the antonyms, incompetent and incapable


evidently
dissimilar

N


2

Capabilities in speech; competencies in (other)
languages


I regard myself as incompetent at speaking Italian, but not incapable of
doing so; given learning opportunities etc. and suitable attendant
circumstances I could pick it up. On the other hand I am becoming
incapable of speaking any language, even my native tongue (English)


“Speech and swallowing disturbances [associated with PD]


Hypophonia
: soft speech. Speech quality tends to be soft, hoarse, and
monotonous. Some people with Parkinson's disease claim that their tongue is
"heavy" or have cluttered speech.

Monotonic speech.

Festinating speech: excessively rapid, soft, poorly
-
intelligible speech.

Drooling: most likely caused by a weak, infrequent swallow and stooped posture.

Dysphagia
: impaired ability to swallow. Can lead to aspiration pneumonia.”
(Wikipedia)




Nick von Tunzelmann, SPRU,
University of Sussex

3

Statics and Dynamics


weasel
-
words?


Building from theory of ‘dynamic capabilities’, but both can be
regarded as what Fritz
Machlup

classified as ‘weasel
-
words’


“Weasel words

is an

informal term

for words and phrases aimed at
creating an impression that something specific and meaningful has
been said, when in fact only a vague or ambiguous claim has been
communicated.


-

Wikipedia


OED gives as of US origin, first ref in 1900


Weasels =
unsavoury

small animals which allegedly smell bad and dig
their way backwards out of their hide



Nick von Tunzelmann, SPRU,
University of Sussex

4

Statics
and dynamics


“For more than 20 years, I have been telling my students that one of
the widespread uses of ‘statics’ and ‘dynamics’ was to distinguish a
writer’s own work from that of his opponents ... Typically, ‘statics’
was what those benighted opponents have been writing; ‘dynamics’
was one’s own
, vastly superior
theory.” (
Machlup

1959)

Nick von Tunzelmann, SPRU,
University of Sussex

5

Nick von Tunzelmann, SPRU,
University of Sussex

6

Summary of (static)
capabilities I


All agents can be thought of as transforming inputs (of different
types) into outputs


All agents deploy resource inputs with certain
characteristics

and
depend on their
competencies

and
capabilities

to generate
utility/profitability


AK
Sen’s

work on consumer capabilities etc.


Capacities = competencies + capabilities


Agents as organizations exist in order to carry out these
transformations using their specific
capacities


the role of the firm
is to transform technologies into products (etc.)


taking and
recombining knowledge

Nick von Tunzelmann, SPRU,
University of Sussex

7

1. Functional dimension,

firm viewpoint

Nick von Tunzelmann, SPRU,
University of Sussex

8

Note: Each rectangle (box) represents an Input-Output relationship for the resource specified
Input agents (suppliers) are listed down the vertical axis of each box
Directions of Output (demands) are listed across the boxes (same in each case)
The Industry relevant to Firm x is shown as the dotted column
SUPPLIER
FIRMS
ETC
BUSINESS
SCHOOLS
ETC
INDUSTRIES OTHER
INDUSTRIES OTHER
UNIVER
-
SITIES
ETC
FIRM x
EDUCATION
SYSTEM
ETC
LABS
ETC
INDUSTRIES OTHER
BANKS
ETC
INDUSTRIES OTHER
INDUSTRIES OTHER
INDUSTRIES OTHER
GOVERN
-
MENT
ETC
HOUSEHOLDS
ETC
INDUSTRIES OTHER
UNSKILLED
LABOUR
INDUSTRIES OTHER
SKILLED
LABOUR
R&D CAPITAL
(TECHNOLOGY)
PHYSICAL
CAPITAL
INFRASTRUCT.
CAPITAL
MATERIALS
(WORKING
CAPITAL)
RESEARCH
LABOUR
MANAGERIAL
LABOUR
2. Resource
dimension,

firm viewpoint

Nick von Tunzelmann, SPRU,
University of Sussex

9

Summary of (static)
capabilities II


Each agent acts variously as
producer, consumer
and supplier
(actors)


Capabilities are highly heterogeneous as between agents of similar
kinds (firms, consumers, etc.)


depends on their

circumstances

and
their
abilities



A key issue for heterogeneous firms is that of amalgamating
resource inflows in different ways (alignment)


the role of
management vs. the role of entrepreneurship (changing the
constraints)

Nick von Tunzelmann, SPRU,
University of Sussex

10

Schema for actors and capabilities







Technology
suppliers


Producers


Consumers


Level

1
:


Characteristics


R&D possibilities
re techniques


Production
possibilities re
processes


Consumption
possibilities re
products


Level

2
:


Capabilities


Supplier
heterogeneity


Producer
heterogeneity


Consumer
heterogeneity


Level

3
:


Profitabilities

/

Rewards


Technological
utility/profitability


Producer
profitability


Consumer utility





Nick von Tunzelmann, SPRU,
University of Sussex

11

Summary of Dynamic Capabilities


These are driven by the business

processes


installed by the
firm (etc.)


Dynamic capabilities are a compound of accumulating
strengths (the Resource
-
Based View of management) and
good foresight (the Strategic Management view)


a key
issue is how to improve the
latter


vision and leadership


transformational rather than just transactional (JM Burns)

Schema for Interactive capabilities

Nick von Tunzelmann, SPRU,
University of Sussex

12

Actors
:
Suppliers
(technology)
Producers
Consumers
Characteristics
S&T
possibilities
Production
possibilities
Product
possibilities
Capabilities
Technological
capabilities
Producer
capabilities
Consumer
capabilities
Rewards
IPR returns
Profitability
Utility
demand
supply
Knowledge exchange
Nick von Tunzelmann, SPRU,
University of Sussex

13

Summary of Dynamic Capabilities


These complex resource and capability systems may be thought of as
determining the
'position'

occupied by the producer firm (
Teece

et al.,
1997), or the
'segment'

where individual consumers are
located


Schumpeterian context
of

dynamic competition


means the
environment (landscape) may be constantly changing



paths



Formally, firms


dynamic
interactive capabilities
represent the extent
to which the change in their capabilities vector influences or is
influenced by the change in the capabilities vectors of consumers
and/or suppliers, in real time


thus an
interactive

element and a

time
-
constrained

one

Competencies versus Capabilities


Many scholars, even those claiming to be part of the evolutionary school, do not
distinguish between ‘competencies’ and ‘capabilities’


I do, though my definitions
are not generally accepted


‘Competencies’ in my approach are learnt
information
(often certificated)


what one
is
taught
, whereas ‘capabilities’ involve learning
processes

oriented to (varieties of)
application


Here I take ‘competencies’ to be enhanced resources, ‘capabilities’ to be enhanced
services (applications)


Competencies are initiated mainly outside the firm (etc.), capabilities within it


Competencies aim to be appropriate, capabilities to be appropriable


Competencies reflect ‘potential’, capabilities are ‘realised’


Capabilities tend to be
relatedly

complex (i.e. in breadth) but cognitively simple (in
depth), while the reverse applies to competencies


But the distinctions can blur, and the two are interlinked over time, and in these leads
and lags often lie the ingredients of commercial success or failure


Nick von Tunzelmann, SPRU,
University of Sussex

14

Dynamic appropriation


IPRs and open innovation


Excess capacity


slack (Penrose,
Brusoni

et al.)


Dynamic scale and scope economies


Imperfect competition and agglomeration economies

Nick von Tunzelmann, SPRU,
University of Sussex

15

Nick von Tunzelmann, SPRU,
University of Sussex

16

Role of suppliers, producers and consumers in
the IC industry








Supplier


Producer



Consumer



Character
-
istics



Basic R&D;

Specialist
process
equipment

Very demanding processing


continual process innovation;

Very high costs of physical
capital, human

capital

Miniaturization generates
speed, low power and
functionality;

Standard products embody
modularity or redundancy

Capabilities



Product design
architectures;

Process set
-
up

Miniaturization drives cost
efficiency, subject to yield


Moore’s Law

Redundancy caters for different
needs;

Availability of partially
customized products

Rewards



Design IPRs;

Equipment
monopolies

Efficiency does not
guarantee profitability



role of other functions

Ever
-
widening range of
applications;

Gain from miniaturization
despite redundancy




Nick von Tunzelmann, SPRU,
University of Sussex

17

Food
-
processing industry



changing consumer landscape

1
)

globalisation

of

tastes

-

rapid

diffusion

of

hamburgers,

soft

drinks
;


2
)

rising

incomes

and

mobility

-

increasing

consumption

of

ethnic

and

exotic

foods
;

3
)

rising

female

employment

-

spread

of

readymade

meals

and

once
-
weekly

shopping

and

hence

storable

foods
;

4
)

increased

stress

-

resort

to


grazing


and

consumption

of

fast

foods
;

5
)

older

age

distributions

-

rising

consumption

of

health

and

functional

foods
;

6
)

growing

environmental

concerns

about

packaging

and

pesticides

-

increasing

consumption

of

organic

goods,

etc
.

Nick von Tunzelmann, SPRU,
University of Sussex

18

Food
-
processing industry



changing technology landscape


These changes in consumer capabilities require
changes in producer capabilities for

dynamic
capabilities



Rising complexity of technology inputs


Full range of new technologies
-

pharmaceuticals,
biotechnology, advanced instrumentation, IT, smart
materials


Production processes now aim at scale economies
in
real time

Nick von Tunzelmann, SPRU,
University of Sussex

19

Food
-
processing industry



changing technology landscape


Shift to product innovation in the industry


Role of supermarket chains (large retailers) in
focusing consumer wants


safety, quality and
variety


Competitive advantage comes from demand
differentiation (upgrading) and leverage, dynamic
advantage from harnessing new technologies and
reputation

20

Coupling technologies and products
-


alignment



By implication, new technologies for such industries
(including services) are usually generated externally,
in the high
-
tech fields


The issue becomes not just how to maximise
interactive learning (through network development)
but how to orient it in the

right


directions, between
laboratories, firms and markets


The problem is exacerbated as one moves upstream
to the creation of human capital and science


getting universities etc. to provide the

right


research
and teaching

Nick von Tunzelmann, SPRU,
University of Sussex

21

Coupling technologies and products
-


alignment



Disconnects are highly likely


the key policy
concern then becomes overcoming

network failure




Alignment of networks


likely to require
involvement by

joined
-
up government




entrepreneurial government capabilities to formulate
and implement appropriate alignment policies

Nick von Tunzelmann, SPRU,
University of Sussex

22

Role of government in alignment


Need to operate through demand as well as supply factors,
including macroeconomic policy


an

evolutionary macroeconomics

?


Need to promote interactivity of knowledge, and in

real
time



regional systems of innovation rather than static clusters


Need to have policy capabilities to make connections,
through

policy learning


(internal and external)


Need to show

vision


as a beacon to industrial entrepreneurs


but consensual


the
E
-
M
-
U
vision in East Asia (electronics, mobile, ubiquity)


Revolutions in technology

and governance


coevolution


Nick von Tunzelmann, SPRU,
University of Sussex

23



1
st
Industrial Rev

2
nd
Industrial Rev

3
rd
Industrial Rev

Approx Dates

1750
-
1815

1870
-
1914

1973
--

Location

UK

USA, Germany

USA, E Asia

Technological
Paradigms

machinery

steam power

iron

chemicals

electricity, oil

steel, plastics

ICTs, biotech.

(nuclear
)

smart materials

Automation

of Transformation

of Transfer

of Control

Process type

Labour

Capital

Information

Size of Firm

Small

Large

Mixed

Advantages

Specialization

Internal Integration

External
Integration

Organization

Entrepreneurial

Multidivision
al

Networked

Industry Structure

Competitive

Oligopolistic

Mixed

Type of Capitalism

Proprietorial

Managerial

Collaborative

Mode of
Governance

Markets

Hierarchies

Networks



Towards a new knowledge
-
based
theory of value


1) Measurement problems


2) Cambridge
-
Cambridge issues


Is it worth it?

Nick von Tunzelmann, SPRU,
University of Sussex

24