Success Traps, Dynamic Capabilities and Firm Performance

Wang, Catherine L., Senaratne, Chaminda and Rafiq, Mohammed (2015) Success Traps, Dynamic Capabilities and Firm Performance. British Journal of Management, 26 (1). pp. 26-44. ISSN 1045 3172

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Official URL: http://dx.doi.org/10.1111/1467-8551.12066

Abstract

Dynamic capabilities (DCs) are fundamental to the understanding of differential firm performance. However, the question remains why some firms are better at developing and applying DCs than others. In particular, successful firms have been warned against the tendency to fall into a success or competence trap, where success reinforces exploitation of existing competences and crowds out exploration of new competences, hindering the development of DCs. Therefore, this study examines the effects of success traps on DCs and consequently firm performance, taking into account firm strategy and market dynamism. To facilitate this, our study also identifies the commonalities of DCs across firms. Drawing on survey data from 113 UK high-tech small and medium-sized firms, we find that success traps have a significant, strong negative effect on DCs, which in turn have a weak positive effect on firm performance; DCs are manifested through absorptive and transformative capabilities as two common features across firms. We also find that the development and application of DCs is related to internal factors (such as success traps) rather than external factors (such as market dynamism).

Item Type: Article
Subjects: N200 Management studies
Department: Faculties > Business and Law > Newcastle Business School > Business and Management
Depositing User: Becky Skoyles
Date Deposited: 30 Jan 2015 09:09
Last Modified: 28 Sep 2015 13:04
URI: http://nrl.northumbria.ac.uk/id/eprint/21273

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