COMPETENCIES, CAPABILITIES AND TIME

COMPETENCIES, CAPABILITIES AND TIME

TOWARDS A DYNAMIC KNOWLEDGE-BASED THEORY OF VALUE

DIME Network, Pisa9 November 2010

Nick von Tunzelmann

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Evolutionary perspective via Capabilities

Throughout this presentation I shall be taking what to my way of thinking is an evolutionary perspective on the production and distribution of knowledge

Start with statics before building up to dynamics – time is an issue I have variously discussed at the (1) short-term level of ‘real time’; (2) long-term level of secular change, based around education and learning; (3) medium-term level of leads and lags in the system – long waves, business cycles, etc.

I shall be doing so through the concepts of ‘capabilities and competencies’, often deemed to be synonymous, but I regard as quite different

Just think of the antonyms, incompetent and incapable – evidently dissimilar

N

Nick von Tunzelmann, SPRU, University of Sussex

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Capabilities in speech; competencies in (other) languages

I regard myself as incompetent at speaking Italian, but not incapable of doing so; given learning opportunities etc. and suitable attendant circumstances I could pick it up. On the other hand I am becoming incapable of speaking any language, even my native tongue (English)

“Speech and swallowing disturbances [associated with PD] Hypophonia: soft speech. Speech quality tends to be soft, hoarse, and

monotonous. Some people with Parkinson's disease claim that their tongue is "heavy" or have cluttered speech.Monotonic speech.Festinating speech: excessively rapid, soft, poorly-intelligible speech.Drooling: most likely caused by a weak, infrequent swallow and stooped posture.Dysphagia: impaired ability to swallow. Can lead to aspiration pneumonia.” (Wikipedia)


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Statics and Dynamics – weasel-words?

Building from theory of ‘dynamic capabilities’, but both can be regarded as what Fritz Machlup classified as ‘weasel-words’

“Weasel words is an informal term for words and phrases aimed at creating an impression that something specific and meaningful has been said, when in fact only a vague or ambiguous claim has been communicated. ” - Wikipedia

OED gives as of US origin, first ref in 1900 Weasels = unsavoury small animals which allegedly smell bad and dig

their way backwards out of their hide


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Statics and dynamics “For more than 20 years, I have been telling my students that one of

the widespread uses of ‘statics’ and ‘dynamics’ was to distinguish a writer’s own work from that of his opponents ... Typically, ‘statics’ was what those benighted opponents have been writing; ‘dynamics’ was one’s own, vastly superior theory.” (Machlup 1959)


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Summary of (static) capabilities I

All agents can be thought of as transforming inputs (of different types) into outputs

All agents deploy resource inputs with certain characteristics and depend on their competencies and capabilities to generate utility/profitability – AK Sen’s work on consumer capabilities etc.

Capacities = competencies + capabilities Agents as organizations exist in order to carry out these

transformations using their specific capacities – the role of the firm is to transform technologies into products (etc.) – taking and recombining knowledge


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1. Functional dimension, firm viewpoint


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Note: Each rectangle (box) represents an Input-Output relationship for the resource specified Input agents (suppliers) are listed down the vertical axis of each box Directions of Output (demands) are listed across the boxes (same in each case) The Industry relevant to Firm x is shown as the dotted column

SUPPLIERFIRMS

ETC

BUSINESSSCHOOLS

ETC

INDUSTRIES OTHER

INDUSTRIES OTHER

UNIVER-SITIES

ETC FIRM x

EDUCATIONSYSTEM

ETC

LABS

ETC

INDUSTRIES OTHER

BANKS

ETC

INDUSTRIES OTHER

INDUSTRIES OTHERINDUSTRIES OTHER

GOVERN-MENT

ETC

HOUSEHOLDS

ETC

INDUSTRIES OTHER

UNSKILLEDLABOUR

INDUSTRIES OTHER

SKILLEDLABOUR

R&D CAPITAL(TECHNOLOGY)

PHYSICALCAPITAL

INFRASTRUCT.CAPITAL

MATERIALS(WORKINGCAPITAL)

RESEARCHLABOUR

MANAGERIALLABOUR

2. Resource dimension, firm viewpoint


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Summary of (static) capabilities II

Each agent acts variously as producer, consumer and supplier (actors)

Capabilities are highly heterogeneous as between agents of similar kinds (firms, consumers, etc.) – depends on their circumstances and their abilities

A key issue for heterogeneous firms is that of amalgamating resource inflows in different ways (alignment) – the role of management vs. the role of entrepreneurship (changing the constraints)


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Schema for actors and capabilities

Technology suppliers

Producers Consumers

Level 1: Characteristics

R&D possibilities re techniques

Production possibilities re processes

Consumption possibilities re products

Level 2: Capabilities

Supplier heterogeneity

Producer heterogeneity

Consumer heterogeneity

Level 3: Profitabilities / Rewards

Technological utility/profitability

Producer profitability

Consumer utility


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Summary of Dynamic Capabilities

These are driven by the business ‘processes’ installed by the firm (etc.)

Dynamic capabilities are a compound of accumulating strengths (the Resource-Based View of management) and good foresight (the Strategic Management view) – a key issue is how to improve the latter – vision and leadership – transformational rather than just transactional (JM Burns)


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Schema for Interactive capabilities

Actors: Suppliers (technology) Producers Consumers

Characteristics S&T possibilities

Production possibilities

Product possibilities

Capabilities Technological capabilities

Producer capabilities

Consumer capabilities

Rewards IPR returns Profitability Utility

demand

supply

Knowledge exchange


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Summary of Dynamic Capabilities

These complex resource and capability systems may be thought of as determining the 'position' occupied by the producer firm (Teece et al., 1997), or the 'segment' where individual consumers are located

Schumpeterian context of ‘dynamic competition’ means the environment (landscape) may be constantly changing – ‘paths’

Formally, firms’ dynamic interactive capabilities represent the extent to which the change in their capabilities vector influences or is influenced by the change in the capabilities vectors of consumers and/or suppliers, in real time – thus an interactive element and a time-constrained one


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Competencies versus Capabilities Many scholars, even those claiming to be part of the evolutionary school, do not

distinguish between ‘competencies’ and ‘capabilities’ – I do, though my definitions are not generally accepted

‘Competencies’ in my approach are learnt information (often certificated) – what one is taught, whereas ‘capabilities’ involve learning processes oriented to (varieties of) application

Here I take ‘competencies’ to be enhanced resources, ‘capabilities’ to be enhanced services (applications)

Competencies are initiated mainly outside the firm (etc.), capabilities within it Competencies aim to be appropriate, capabilities to be appropriable Competencies reflect ‘potential’, capabilities are ‘realised’ Capabilities tend to be relatedly complex (i.e. in breadth) but cognitively simple

(in depth), while the reverse applies to competencies But the distinctions can blur, and the two are interlinked over time, and in these leads

and lags often lie the ingredients of commercial success or failure


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Dynamic appropriationIPRs and open innovationExcess capacity – slack (Penrose, Brusoni et al.)Dynamic scale and scope economiesImperfect competition and agglomeration economies


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Role of suppliers, producers and consumers in the IC industry

Supplier Producer Consumer

Character-istics

Basic R&D;Specialist process equipment

Very demanding processing – continual process innovation;Very high costs of physical capital, human capital

Miniaturization generates speed, low power and functionality;Standard products embody modularity or redundancy

Capabilities Product design architectures;Process set-up

Miniaturization drives cost efficiency, subject to yield – Moore’s Law

Redundancy caters for different needs;Availability of partially customized products

Rewards Design IPRs;Equipment monopolies

Efficiency does not guarantee profitability – role of other functions

Ever-widening range of applications;Gain from miniaturization despite redundancy


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Food-processing industry – changing consumer landscape

1) globalisation of tastes - rapid diffusion of hamburgers, soft drinks; 2) rising incomes and mobility - increasing consumption of ethnic and

exotic foods;3) rising female employment - spread of readymade meals and once-

weekly shopping and hence storable foods;4) increased stress - resort to ‘grazing’ and consumption of fast foods;5) older age distributions - rising consumption of health and functional

foods;6) growing environmental concerns about packaging and pesticides -

increasing consumption of organic goods, etc.


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Food-processing industry – changing technology landscape

These changes in consumer capabilities require changes in producer capabilities for ‘dynamic capabilities’

Rising complexity of technology inputs Full range of new technologies - pharmaceuticals,

biotechnology, advanced instrumentation, IT, smart materials

Production processes now aim at scale economies in real time


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Food-processing industry – changing technology landscape

Shift to product innovation in the industryRole of supermarket chains (large retailers) in

focusing consumer wants – safety, quality and variety

Competitive advantage comes from demand differentiation (upgrading) and leverage, dynamic advantage from harnessing new technologies and reputation

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Coupling technologies and products - ‘alignment’

By implication, new technologies for such industries (including services) are usually generated externally, in the high-tech fields

The issue becomes not just how to maximise interactive learning (through network development) but how to orient it in the ‘right’ directions, between laboratories, firms and markets

The problem is exacerbated as one moves upstream to the creation of human capital and science – getting universities etc. to provide the ‘right’ research and teaching


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Coupling technologies and products - ‘alignment’

Disconnects are highly likely – the key policy concern then becomes overcoming ’network failure’

‘Alignment of networks’ likely to require involvement by ‘joined-up government’ – entrepreneurial government capabilities to formulate and implement appropriate alignment policies


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Role of government in alignment

Need to operate through demand as well as supply factors, including macroeconomic policy an ‘evolutionary macroeconomics’?

Need to promote interactivity of knowledge, and in ‘real time’ regional systems of innovation rather than static clusters

Need to have policy capabilities to make connections, through ‘policy learning’ (internal and external)

Need to show ‘vision’ as a beacon to industrial entrepreneurs – but consensual the E-M-U vision in East Asia (electronics, mobile, ubiquity)


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Revolutions in technology and governance – coevolution

1st Industrial Rev 2nd Industrial Rev 3rd Industrial Rev Approx Dates 1750-1815 1870-1914 1973-- Location UK USA, Germany USA, E Asia Technological Paradigms

machinery steam power iron

chemicals electricity, oil steel, plastics

ICTs, biotech. (nuclear) smart materials

Automation of Transformation of Transfer of Control Process type Labour Capital Information Size of Firm Small Large Mixed Advantages Specialization Internal Integration External

Integration Organization Entrepreneurial Multidivisional Networked Industry Structure Competitive Oligopolistic Mixed Type of Capitalism Proprietorial Managerial Collaborative Mode of Governance

Markets Hierarchies Networks


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Towards a new knowledge-based theory of value

1) Measurement problems2) Cambridge-Cambridge issuesIs it worth it?

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