Constance E. Helfat– 1997, SMJ

KNOW-HOW AND ASSET

COMPLEMENTARITY AND DYNAMIC

CAPABILITY ACCUMULATION:

THE CASE OF R&D

Dynamic capabilities – “The subset of the competences/ capabilities which allow the fi rm to create new products and processes and respond to changing market circumstances” (Teece & Pisano)

The Question - “When fi rms seek to alter their stock of knowledge in response to change in the environment, do such eff orts depend on the fi rms’ existing stocks of complementary know-how and other assets?”

DYNAMIC CAPABILITIES

26 largest US energy firms (1976 to 1981)

Experienced two large spikes in oil price & OPEC supply restrictions

Industry responded in many ways, including research into synthetic oil production

Efforts to create new processes and products involved a high amount of rapid R&D investments

THE STUDY

Two types of R&D The attempt to make incremental improvements to

conventional technologies The attempt to create major improvements to less

developed technologies

The US energy industry spent time and money on both Conventional – Resource location & extraction Novel – Gasification/liquefaction

Nearly 6x was spent on coal over shale or tar

R&D: CONVENTIONAL VS. NOVEL

R&D: CONVENTIONAL VS. NOVEL

1a: Firms that had larger stocks of knowledge from past refi ning R&D were likely to have undertaken larger amounts of coal gasifi cation/liquefaction R&D

1b: Firms that had larger accumulated refi nery assets were likely to have undertaken larger amounts of coal gasifi cation/liquefaction R&D

1c: Firms that had larger stocks of knowledge from past R&D on other synthetic fuels were likely to have undertaken larger amounts of coal gasifi cation/liquefaction R&D

2: Firms that had larger accumulated coal assets were likely to have undertaken larger amounts of coal gasifi cation/liquefaction R&D

HYPOTHESES

Basically: Dierickx and Cool were correct in saying that ‘firms must accumulate assets such as technological expertise over time (by undertaking R&D) and that increments to asset stocks may depend on the level of

complementary asset stocks within the firm’.

VARIABLES TESTED

R&D into coal conversion rose during 1976 through 1981, partly in response to higher oil prices

The industry as a whole looked to benefi t from complementary knowledge acquired from past refi ning R&D (rather, prior refi ning knowledge led to greater R&D spending)

Larger preexisting stocks of coal assets led to higher coal conversion R&D spending

Prior R&D into coal conversion had a signifi cant impact on coal conversion R&D spending

REGRESSION FINDINGS

1a: Firms that had larger stocks of knowledge from past refi ning R&D were likely to have undertaken larger amounts of coal gasifi cation/liquefaction R&D

1b: Firms that had larger accumulated refi nery assets were likely to have undertaken larger amounts of coal gasifi cation/liquefaction R&D

1c: Firms that had larger stocks of knowledge from past R&D on other synthetic fuels were likely to have undertaken larger amounts of coal gasifi cation/liquefaction R&D

2: Firms that had larger accumulated coal assets were likely to have undertaken larger amounts of coal gasifi cation/liquefaction R&D

RESULTS

In response to rising oil costs, fi rms with larger amounts of complementary technological knowledge and physical assets also undertook larger amounts of R&D on coal conversion

For the large diversifi ed US energy fi rms, novel R&D benefi ted from complementary R&D-based knowledge and assets

Results of this study may not apply to smaller, more focused fi rms performing R&D

Results may also not hold outside of the unique environment experienced by energy fi rms during the 1970s energy crisis

CONCLUSION