Dynamic capabilities “now we see them” in the airline industry
The study of dynamic capabilities is one of the dominant research streams in strategic management. This dissertation contributes to the dynamic capabilities literature by theorizing and testing key questions regarding the relationship between dynamic capabilities and firm performance. Specific questions to be resolved include: 1) how does the performance of dynamic capabilities affect how firms adapt and co-evolve with the environment, 2) what is the interplay of two different kinds of dynamic capabilities operating simultaneously in the same context, and 3) what role does environmental dynamism and munificence play in the relationship between capability development and fitness in asset intensive industries. These questions are examined in the context of the airline industry where I identify two main capabilities that act as dynamic capabilities, namely, Resource Planning Capability (RPC) and Alliance Management Capability (AMC). First, I propose that there is a positive relationship between the two main capabilities (RPC and AMC) and sustained performance. Secondly, I propose alliance orientation will precede the development of an alliance capability. Third, I propose the interaction effect of AMC and RPC is positively associated with sustained performance. Finally, I propose that the positive relationship between each of these capabilities and sustained performance is moderated by environmental dynamism and environmental munificence such that the relationships is weaker, or stronger, at different levels of dynamism and munificence. I test hypotheses using longitudinal panel data on a sample of 132 firms in the airline industry. The analysis was performed using econometric estimators: a stochastic frontier estimator to test technical fitness of capabilities and random effect estimator to test the effect on dependent variable sustained performance. The results show that the two capabilities (RPC and AMC) have a positive effect on sustained performance. Interestingly, the two moderators appear to have differing effects on the two capabilities. Environmental dynamism appear to strengthen RPC and weakens AMC. Conversely, environmental munificence strengthen AMC and weakens RPC.