Aimilia Protogerou and Yannis Caloghirou

1. The relevance of the dynamic capabilities concept in low and high-tech sectors: An empirical Approach Aimilia Protogerou and Yannis Caloghirou Laboratory of Industrial and Energy Economics, National Technical University of Athens

2. Main aim and positioning of the paper and the current DCs Debate • Despite the intense research work related to the Dynamic Capabilities (DCs) framework there is still no general agreement on the DCs construct and boundry conditions among scholars • Empirical work remains limited, with sparse and disjoint empirical findings (e.g. Zahra et al., 2006; Ambrosini and Bowman, 2009; Wu, 2010, Peteraf et al., 2012)

3. Main aim and positioning of the paper in the current DCs debate Taking into consideration that there is significant variation in the literature regarding the kind of external business environments that are relevant to DCs: • many scholars clearly suggest that DCs are synonymous to rapidly changing conditions (e.g. Teece, 1997; Teece 2007), • some acknowledge their role in moderately changing environments (e.g. Eisenhardt and Martin, 2000; Helfat et al., 2007), • others choose not to include environmental conditions in their research (e.g. Makadok, 2001) this paper empirically explores the role of DCs on young firms’ performance in two distinct environmental conditions i.e. high and low-tech sectors.

4. A working Definition of DCs Dynamic capabilities can be defined as “the capacity of an organization to purposefully and systematically create, extend or modify its resource base”(Helfat et al., 2007). • “Creating” a resource includes all forms of resource creation, such as obtaining new resources through acquisitions and alliances, as well as through innovation and entrepreneurial activity. • “Extending” their resource base may result in promoting growth in an ongoing business. • “Modifying” their resource base includes any reaction to change, e.g. response to external environment changes

5. Dynamic capabilities in low-tech sectors Much theoretical and empirical research on DCs has been focused on large, established firms operating in high-tech sectors However, • frequent use of DCs can also be justified in moderately changing environmental contexts (e.g. Eisenhardt and Martin, 2000; Helfat et al., 2007; Helfat and Peteraf, 2009), • mature, traditional industries although not dynamic by definition they cannot be characterized as perfectly stable contexts as they have to confront major elements of change in the global arena such as globalization, trade liberalization, changing industry structures and regulations, increasing social pressures and the recent financial crisis • DCs can apply both to newly formed as well as to established organizations (Helfat et al., 2007)

6. Dynamic capabilities and young firms Limited attention on young firms (McKelvie and Davidsson, 2009; Zahra et al, 2006 ) because it is assumed that established firms with their size and age ensure an adequate organizational structure and the required resources to develop and exercise dynamic routines. Nevertheless, DCs can be important to young firms’ survival and growth by expanding their limited set of resources and/or by reconfiguring their resources to adapt to technology changes, uncertain markets, better resourced rivals or even to internal organizational changes.

7. The data originate from the AEGIS Project survey Distribution by sector group Survey design • Telephone interview with one of the firm founders in 10 European countries (2011) • Sample firms: young independent entities founded between 2001 and 2007 with an average age of 7.1 years (min: 4; max: 11 years)

8. The sectoral dimension: Selected high-tech Sectors (OECD classification based on technological/ RTD intensity)

9. The sectoral dimension: Selected Low-tech Sectors (OECD classification)

10. The dynamic capabilities constructs indicators (1) • New product development capabilities • Capability to offer novel products/services • Capability to adapt products/services to the specific needs of different customers/market niches • Marketing and promotion activities • Market sensing capability • Adaptation of best practices • Rapid response to competitive moves • Change of practices based on customer feedback • Frequent consideration of the consequences of changing market demand • Quick recognition of shifts in the market • Quick understanding of new opportunities to better serve customers • Technology sensing capability • Practical experience sharing on a regular basis • Formal R&D department in the firm • Formal engineering and technical studies department in our firm • Significant design activity to introduce new products/services in the market

11. The dynamic capabilities constructs indicators (2) • Networking • Market processes (collecting information about competitors, accessing distribution channels, explore export opportunities, advertising and promotion) • Technology & production (development of new products, management of production and operations, access to skilled personnel) • Financial and legal support (obtaining business loans, attracting funds, support on legal issues) • Participation in technology collaborations • Strategic alliances • R&D agreements • Technical cooperation agreements • Licensing agreements • Research contract-out

12. The impact of sectoral group on the development of dynamic capabilities

13. Dynamic capabilities have a significant impact on young firms innovative performance

14. Dynamic capabilities have a significant impact on young firms R&D activity

15. Dynamic capabilities have a positive impact on young LMT firms Average turnover

16. Dynamic capabilities have a positive impact on young firms international sales

17. Concluding remarks • DCs may exist in both LMT and HMT firms although capabilities such as technology sensing and participation in collaborative technology agreements seem to be present to a relatively smaller degree in LMT firms. • DCs appear to have a significant positive impact on young firms innovative performance in both high and low-tech sectors. • DCs appear to have a significant positive impact on the average turnover of firms operating in LMT sectors while the relevant effect on HMT firms appears to be insignificant. • Certain DCs appear to have a significant positive impact on the international sales of LMT and HMT firms.

18. Concluding remarks • Dynamic capabilities can be present in newly-established firms that in their majority are micro and small firms. • Managers in young firms: • should draw up a ‘dynamic capabilities portfolio’ of their firm to help them assess their actual and potential DC use in relation to their capacity for adding value to the business. • better understand the role of knowledge creation and capability development in LMT sectors as a way to foster their competitiveness and strengthen their role in highly competitive international markets.

19. Thank you very much for your attention! protoger@chemeng.ntua.gr y.caloghirou@ntua.gr