Based on the theoretical findings, we propose a tri-core model which aims at exploring the influence of the three dynamic capability dimensions Technology, Business, and Network. More precisely, these three capabilities are each considered to positively influence firm growth (see Figure 2). In the following, we suggest three hypotheses.
Originally dynamic capabilities were introduced as an effort to explain how companies can achieve and sustain competitive advantage in industries with speedy technological change (Teece et al. 1997). Consequently, from the nature of e-commerce it logically derives that companies operating in this industry must possess technology capabilities- to a various de-gree. It can be assumed that otherwise they simply could not be able to operate in the e-commerce sector.
Technology capabilities can be defined as the ability to provide new products and/or ser-vices, to automate business processes and to implement new technological innovations (Hoque et al., 2006). Those capabilities can be considered as critical technology capabilities for firms throughout e-commerce capability research (Lin and Hsia, 2011). By focusing on IT innovation, Wheeler (2002) applies technology capabilities on net enabled organizations (NEO). NEO are companies operating in dynamic markets and relying which rely on digi-tal networks. According to this study, companies constantly adopt novel technologies and therefore constantly are in the need to reconfigure their resources in order to exploit busi-ness opportunities. Moreover, a persistent reconfiguration of technology resources acts as a stimulus to the value of a firm‘s resources and thus technology capabilities can be utilized to gain a periodical SCA (Wheeler, 2002). Rashirad et al. (2013) argue that e-commerce firms may be successful if they are able to extract new ideas from customers by using new Internet-based technologies (Rashidirad et al., 2013).
Being in line with that, Wu & Hsia (2008) state that an increasing affordability of innova-tive technologies has formed new opportunities for e-commerce firms. Managers of e-businesses are in constant need of refiguring technological resources and expertise in order to embrace those opportunities. Research on this topic has shown that, in order to tackle upcoming challenges, high priority should be placed on reconfiguring a firm’s technological capabilities. By doing so, a sustained competitive advantage in e-commerce can be generat-ed (Daniel and Wilson, 2003; Wu and Hsia, 2008; Rindova & Kotha, 2001).
In addition, a study by Bharadwaj et al. (1999) used firm performance dimensions such as strategic flexibility and intangible value to investigate a firm‘s IT-Performance relationship. Their findings also implied that IT investment favors a firm‘s performance potential. It therefore can be concluded that technology capabilities and firm performance are positively related. Thus, we suggest that:
H1a: Technology Capabilities have a positive impact on firm growth.
Teece et al. (1997) break down dynamic capabilities into managerial and organizational processes. Moreover, business capabilities have been referred to as the ability to understand the overall market environment and the specific organizational context, and execute busi-ness practices for achieving strategic and operational goals (Kohli & Gover, 2008; McDon-ald, 2007). More precisely, business capabilities represent a firm‘s ability to utilize market opportunities, to deliver new value propositions, to reinvent business models, and to ab-sorb new knowledge and skills (Lin & Hisa*, 2011). According to Lin & Hisa (2011), these capabilities are translated into business activities such as fostering business agility and mar-ket responsiveness, identifying customer value proposition, and reinventing established business models. In the following, each activity‘s impact on an e-commerce firm‘s growth will be explained.
First, fostering business agility and market responsiveness are described by Lin & Hisa (2011) as the ability to sense market changes and business opportunities. In the e-commerce environment, this ability is considered critically for innovation in the short term and growth in the long term (Sambamurthy et al., 2003; Malhotra et al., 2005).
Second, identifying customer value proposition describes a firm‘s ability to communicate a product‘s or service‘s value to customers (Lin & Hisa, 2011).
Johnson et al. (2008) furthermore argue that a clear definition of customer value proposi-tion is crucial to any new venture‘s survival. Hence, this ability can ―support a firm‟s success ac-tively by enhancing value creation and improving business model design through innovations in products, ser-vices, channels and market segmentation‖ (Lin & Hisa, 2011, p.1888).
Third, business model reinvention describes a firm‘s ability to introduce sound solutions as inputs, match them with business opportunities, deliver innovative products and services for customer value creation, design a profit formula for execution, and commit to recon-figuring its key resources and processes (Lin & Hisa, 2011). Hence, business model rein-vention is a main source of sustaining competitive advantage for e-business firms (Johnson et al., 2008). It can therefore be assumed that the bundle of business activities supports firm growth. Hence, we suggest:
H1b: Business capabilities have a positive impact on firm growth.
Firms utilize their networks to access external resources, to improve their strategic posi-tions, to acquire new skills and knowledge, to control transaction costs and coordinate ac-tivities effectively, and to obtain new technologies (Alvarez & Barney, 2001). Therefore it is safe to say that networks can be seen as a resource itself (Amit & Schoemaker, 1993). Building on that argument, Lin and Hisa (2011) introduce the term ‗network capability‘. They explicate that ―network capabilities refer to the ability to build and govern inter-organizational partnerships and collaborative relationships with customers and partners for the execution of value co-creation activities‖ (Lin and Hisa, 2011, p.1888).
Research on networks has furthermore proven that the success of a firm is likely to depend on its ability to obtain resources through networking (Watson, 2007; Zhai and Aram, 1995). It is furthermore suggested that networking enables SMEs to gain access to complementary or external resources (Jarillo, 1989; Chang, 2003; Liao, Kickul & Ma, 2009). This effect is of major importance for smaller firms and start-up firms as they are often limited by resource scarcity (Døving & Gooderham, 2008). These kinds of cooperation, in turn, can provide the attainment of economies of scale in SMEs without causing economic inefficiency due to large size (Julien, 1993). Watson hence argues that the utilization of networks can ―poten-tially lower a firm‟s risk of „failure‟ and increase its chances of „success‟‖ (2007, p.854). It is further-more suggested that a collaborative network fosters innovation and firm growth (Pisano & Verganti, 2008).
A study conducted by Havnes and Senneseth (2001) found that networking activities had no short-term benefits such as growth in employment or turnover. However, the findings indicate a clearly positive relationship between networking and the geographic extension of markets. Hence, they argue that networking has an indirect effect on firm growth as it sus-tains long-term goals of the firms. Refuting findings were produced by Watson (2007), who studied the relationship between networking and firm performance. His findings show a significant positive relationship between networking and both firm survival and growth. Therefore, we suggest:
H1c: Network capabilities have a positive impact on firm growth.
2 Theoretical Framework
2.1 Firm Growth
2.2 Dynamic Capabilities
2.3 Dynamic Capabilities in E-Commerce
3.1 Technology Capabilities
3.2 Business Capabilities
3.3 Network Capabilities
4.1 Research Philosophy
4.2 Research Approach
4.3 Research Purpose
4.4 Research Strategy
4.5 Time Horizon
4.6 Sample and Data Collection
5.1 Normal Distribution Test
5.2 Correlation Analysis
5.3 Factor Analysis
5.4 Linear Regression Analysis
5.5 Table 12:Results Regression Analysis
6.1 Exploring potential causes
7.1 Implications for Theory
7.2 Implications for Practice
7.3 Limitations and further research
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Do Dynamic Capabilities influence the Growth of Start-Ups?