CATEGORY: EARLY STAGE
DYNAMIC CAPABILITIES IN COMPLEX ENVIRONMENTS: A QUALITATIVE APPROACH
The management literature is in a constant agony to offer new ideas and unfold innovative business practices. In fact, management, throughout these years, has accumulated ideas from nearly all scientific areas. A theory stemming from biology, namelycomplexity theory, and the concept of dynamic capabilities emerge as the value adding perspectives of the present study. The dynamic nature of these capabilities will create the link to the environmental complexity. In brief, the author applies complexity theory to business strategy, which in many cases is considered as static in the relevant literature. Following a qualitative approach, through casestudies, the author investigated two companies in the FMCG and the Retail industry, revealing several aspects of their presence in the market landscape. The conclusion is that nowadays companies are aware of the complexity they face, thus seeking for more dynamic ways to confront it.
I. PURPOSE OF THE STUDY
Nowadays, dramaticchanges occur in the structure and operational scope of business, governmental and non-profit organisations. These changes are originated in both the external environment of the company (globalisation, competition, etc.) and the internal one (the role of human resources, certified quality, benchmarking, etc.). Moreover, organisational entities are being created and dissolved at increasing rates.All these factors have opened the boundaries of the traditional organisation, extending its limits to areas that we have not explored or even thought of before [Cohen, 1999].
The fundamental question in the field of strategic management is how firms achieve and sustain competitive advantage [Rumelt et al., 1994]. Andrews’  influential model of corporate strategy suggests that firms obtainsustained competitive advantage by implementing strategies, which exploit their internal strengths, respond to environmental opportunities, avoiding external threats and improving internal weaknesses.
Each company can be regarded internally as a pool of resources which, autonomously or combined, lead to the development of dynamic capabilities so as to absorb internal complexity. Alternatively,it is regarded externally as a strategic position in the market, which is altered in various ways to confront external complexity. However, a company is a single entity, linking the two approaches. Chaffee [1985, pages 89-90] argues that ‘a basic premise of thinking about strategy concerns the inseparability of organization and environment… the organization uses strategy to deal with changingenvironments’. In the same vein, Barney [2001a, 2001b] admits that it is important to analyse sustainable competitive advantage in a dynamic fashion.
Buckley  states: ‘the variety within a system must be at least as great as the environmental variety against which it is attempting to regulate itself. Put more succinctly, only variety can regulate variety’. This is known in cybernetics as thelaw of requisite variety [Ashby, 1956]. Ashmos et al.  in their paper, which is one of the few with empirical results, distinguish two types of complexity: the internal complexity (derived from within the company) and the external one (derived from the environment). According to the aforementioned law, internal complexity should match the external one. This is similar to what Boisot implied.
The aims of the present study are twofold. First, we develop a new conceptualisation of the linkages between complexity of the external environment and the dynamic capabilities of the organisation. Our second aim is to test that framework using initial empirical findings from case studies in two industry sectors. The existing literature on complexity is almost entirely theoretical,...