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Conference Proceedings (2015), Academy of Management Annual Conference, Vancouver, Canada, Academy of Management

The origin of capabilities? A microfoundational theory of firm heterogeneity

Aggarwal Vikas, Posen Hart, Workiewicz Maciej

Inter-firm performance heterogeneity is generally attributed to firm capabilities, which involve stable patterns of coordinated action as a core building block. Our understanding of capability origins, however, is limited because we often conceptualize the firm as a unitary actor. We develop a computational model of the genesis and development of coordinated action grounded in microfoundations. Our results show that a simple and plausible set of assumptions regarding individual behavior result in emergent coordinated action with three key characteristics: its properties are consistent with the idea of operational capabilities; it is endogenously adaptable to external change, shaping our understanding of the need for dynamic capabilities; and it offers an individually-grounded explanation for the origin of inter-firm heterogeneity. Our insights lead to propositions that can guide future work on strategy microfoundations.

AGGARWAL, V., POSEN, H. and WORKIEWICZ, M. (2015). The origin of capabilities? A microfoundational theory of firm heterogeneity. In: Academy of Management Annual Conference, Vancouver, Canada. Academy of Management.