Investing in Capabilities: The Dynamics of Resource Allocation
Corinne A. Coen, Catherine A. Maritan
Organization Science · 2011 · Volume 22 · Issue 1
Abstract
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.
Keywords
dynamic capabilities, investment, computer simulation, agent-based model, resource allocation, factor market
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