OS-SPEC-05-0713.R3: Building Dynamic Capabilities
capabilities lies across multiple levels of analysis, are the different mechanisms to innovate complementsor substitutes?
Extant research generally focuses on only one level of analysis, while neglecting other levels of analysis, thus opening the door for spurious findings due to unobserved heterogeneity. When studyingthe dynamics of technological innovation, for example, researchers generally analyze incumbent firms asa more or less homogenous group of firms or as an industry, thus neglecting to investigate firm-differential performance (Christensen, 1997; Foster, 1986; Henderson and Clark, 1990; Tushman andAnderson, 1986). Likewise, when analyzing firm-differential performance, researchers invoke constructslike resources, competences, capabilities, processes, and routines (Barney, 1991; Henderson andCockburn, 1994; Nelson and Winter, 1982; Peteraf, 1993), while neglecting individual-levelheterogeneity. Finally, the handful of researchers that highlight individual-level heterogeneity as anantecedent to firm-level heterogeneity (Lacetera, Cockburn, and Henderson, 2004; Zucker and Darby,1997a; Zucker, Darby, and Brewer, 1998; Zucker, Darby, and Armstrong, 2002), generally discount firm-and network-level effects.Recent theoretical contributions (Felin and Foss, 2005; Felin and Hesterly, 2006; Klein,Dansereau, and Hall, 1994; Dansereau, Yammarino, and Kohles, 1999), however, have identified twoserious problems with the dominant uni-level research approach, which we find particularly salient to ourresearch question concerning the locus of antecedents to dynamic capabilities. First, concentrating ononly one level of analysis implicitly assumes that most of the heterogeneity is located at the chosen level,while alternate levels of analysis are considered to be more or less homogenous. Studies of firm levelheterogeneity assume, for example, that significant variation occurs at the firm level of analysis, whileindividuals are more or less homogenous or randomly distributed across firms. Second, when focusing onone level of analysis, researchers implicitly assume that the focal level of analysis is more or lessindependent from interactions with other lower- or higher-order levels of analysis. Firm-levelheterogeneity, for example, is assumed to be relatively independent from individual- or network-leveleffects. Taken together, the assumptions of homogeneity in and independence from alternate levels of analysis are serious concerns that can potentially lead to spurious empirical findings.To address the threats of homogeneity and independence, we develop a multi-level theoreticalmodel that accounts for potential heterogeneity in and across three different and distinct levels whenexplaining and predicting innovation: The
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