Investing in Capabilities: The Dynamics of Resource Allocation

Corinne A. Coen () and Catherine A. Maritan ()
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Corinne A. Coen: Weatherhead School of Management, Case Western Reserve University, Cleveland, Ohio 44106
Catherine A. Maritan: Whitman School of Management, Syracuse University, Syracuse, New York 13203

Organization Science, 2011, vol. 22, issue 1, 99-117

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 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:22:y:2011:i:1:p:99-117

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