Article ID: | iaor20111731 |
Volume: | 22 |
Issue: | 1 |
Start Page Number: | 99 |
End Page Number: | 117 |
Publication Date: | Jan 2011 |
Journal: | Organization Science |
Authors: | Coen Corinne A, Maritan Catherine A |
Keywords: | simulation: applications, organization |
In this research, we examine the dynamic capability of resource allocation to invest in operational capabilities. Using a computer simulation, we model a process of firms competing in factor markets for opportunities to invest in existing capabilities and acquire new ones. Based on the simulation results, we derive a set of propositions about the conditions under which there are and are not performance benefits from possessing a superior ability to search for new capabilities. Because the definition of what constitutes a new capability is based on a firm's preexisting capabilities, we also incorporate differences in initial endowments into the analysis. We find that endowment and search ability both matter, and that in many circumstances, the effects of possessing a superior endowment dominate the effects of superior search ability.