Definitions of Key Concepts
Microfoundations: The concept of microfoundations research is defined as looking at a collective or macro concept at a lower analytical level. One way of showing this is by setting the analytical level at N. Then, the microfoundations research exist at analytical level N – 1 at time t. (Felin et al., 2012).
Dynamic Capabilities: A dynamic capability is “the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments” (Teece, Pisano & Shuen, 1997).
Managerial Capabilities: In strategic management, the term “capability” refers to the capacity to perform a function or activity in a generally reliable manner when called upon to do so. (Amit & Schoemaker, 1993; Helfat & Winter, 2011)
Managerial Cognitive Capabilities: A managerial cognitive capability is the capacity of an individual manager to perform one or more of the mental activities that comprise cognition (Helfat & Peteraf, 2015)
This section will review existing literature regarding global strategy, dynamic capabilities and microfoundations. First, there will be an explanation of global strategy and the need for adapting to a changing global business environment, followed by a description of microfoundations research. Dynamic capabilities literature and its microfoundations research is then reviewed. Based on the literature, the section will conclude with building the cognitive thinking on dynamic capabilities, which will act as a primary frame of reference for the study.
Global strategy is not a new concept anymore. From one of the earliest mentions of global strategy by Perlmutter (1969) when he discussed different approaches to multinational management, the concept has been popular. Global strategy itself lies in the intersection between international business and strategic management (Peng, 2006) and can be defined in many ways. One way is seeing global strategy as a particular form of strategy for multinational enterprises (MNEs) that sees the world as one global marketplace (Yip, 2003). Another, broader definition of global strategy is that of international strategic management (Inkpen & Ramaswamy 2006; Lu 2003). Even broader still, Peng (2006) defines global strategy as “the strategy of firms around the globe, which is firms’ theory about how to compete successfully”.
The last definition includes both cross-border and domestic strategies in global strategy. Peng (2006) argue that this is because the line between what is seen as domestic and international strategies are increasingly becoming harder to pinpoint. In this paper, we use Peng’s (2006) definition as it highlights the complexities experienced by MNEs today regarding global strategy.
In a review of global strategy research to that point, Ghoshal (1987), devised a global strategy framework based on integration vs local responsiveness. In this framework, Ghoshal (1987) placed research on global strategy according to its sources of competitive advantage and strategic objectives. Impactful research to that point included work such as the Five forces framework (Porter, 1979), cultural differences (Hofstede, 1980), core competencies (Hamel & Pralahad, 1985) and the Growth share matrix (Boston Consulting Group, 1982). Although old, the aforementioned theories still provide basis for research and how practitioners act in today’s business environment. It is important to recognize, however, that the global business environment is very different today compared to some forty years ago. Today, global strategy struggles mostly with pace because of hypercompetitive environments (D’Aveni, 1994) or high-velocity environments (Bourgeois & Eisenhardt, 1988). MNEs need to face these challenges. Not doing so can have severe consequences that affects firm performance negatively (Audia, Locke and Smith, (2000). Recognizing the changes in the new global environment, Reeves, Moore & Venema (2014) decided to revisit the growth share matrix (BCG, 1982). When doing so, Reeves, Moore & Venema (2014) found that the pace of change is the main aspect that firms today have to consider compared to when the original matrix was constructed. A second key takeaway when using the framework in a modern capacity was to efficiently be able to select and bet on the right opportunities in this new high-paced environment.
DEFINITIONS OF KEY CONCEPTS
WHAT ARE MICROFOUNDATIONS?
MICROFOUNDATIONS OF DYNAMIC CAPABILITIES
REFLECTION ON LITERATURE REVIEW
COGNITIVE THINKING ON DYNAMIC CAPABILITIES
METHOD AND METHODOLOGY
Confidentiality and Anonymity
STRATEGY AT THE CASE COMPANY
TABLE 1: PRESENTATION OF EMPIRICAL FINDINGS
Problem Solving and Reasoning
Language and Communication