Dynamic capabilities: What are they?

This paper focuses on dynamic capabilities and, more generally, the resourc e-based view of the firm. We argue that dynamic capabilities are a set of s pecific and identifiable processes such as product development, strategic d ecision making, and alliancing. They are neither vague nor tautological. Al though dynamic capabilities are idiosyncratic in their details and path dep endent in their emergence, they have significant commonalities across firms (popularly termed 'best practice'). This suggests that they are more homog eneous, fungible, equifinal and substitutable than is usually assumed. In m oderately dynamic markets, dynamic capabilities resemble the traditional co nception of routines. They are detailed, analytic stable processes with pre dictable outcomes. In contrast, in high-velocity markets, they are simple, highly experiential and fragile processes with unpredictable outcomes. Fina lly, well-known learning mechanisms guide the evolution of dynamic capabili ties. In moderately dynamic markets, the evolutionary emphasis is on variat ion. In high-velocity markets, it is on selection. At the level of REV, we conclude that traditional REV misidentifies the locus of long-term competit ive advantage in dynamic markers, overemphasizes the strategic logic of lev erage, and reaches a boundary condition in high-velocity markets. Copyright (C) 2000 John Wiley & Sons, Ltd.