Dynamic Capabilities Theory

The core underlying assumption of dynamic capabilities theory is the interaction between the resource base of a company and its capabilities to extend and modify existing resources or create new ones to maintain or achieve a competitive advantage. The body of literature on dynamic capabilities has grown rapidly in the last two decades, leading to an intensively studied and complex management theory. This chapter will focus on three of the most relevant research topics related to supply chain management and how dynamic capabilities are employed in these contexts. Key variables for dynamic capabilities will be introduced, including nature, role, context, building, outcome, and heterogeneity. The domains of supply chain resilience, business models, and sustainable supply chain management are described where the dynamic capabilities theory applies. Relationships between the key variables are discussed with theoretical predictions for future applications.