| Summary: | This thesis uses an enactment perspective to critique and develop the concept of organisational capability. It approaches organisational capability from an interpretivist angle and inquires how organisations actually develop and renew their capabilities for sustainable competitive advantage. As a consequence of adopting the enactment perspective, the thesis reveals that organisational capabilities are much more context based and variable than the positivist and predictive representation of the concept in the extant literature. It also proposes that organizational design and learning processes play a key role in the development of organisational capabilities. The research uses qualitative interviews within a case study research design. It studies six medium-sized, mature organisations operating successfully in a variety of industries with diverse market dynamism. In order to move away from a linear representation of organisational capability, the study particularly focuses on the organisational antecedents of capability development in these organisations by relying on participants’ accounts to describe how the firm coped with external environmental changes throughout its history. Based on inductive theorising from intra- and cross-industry analysis, the study observes certain discrepancies in the way existing theories conceptualise organisational capabilities as well as confirms some of their suppositions. Regarding the antecedents of organisational capabilities, the empirical evidence concludes that the development and evolution of organisational capabilities are not only determined by the level of industry dynamism (Eisenhardt and Martin, 2000; Zollo and Winter, 2002); on the contrary, internal endogenous factors seem to matter as much as exogenous shocks. In terms of endogenous antecedents the study reveals a broad contrast between two distinct organisational learning mindsets – learning to innovate and innovating to learn – that influence how external industry factors are interpreted and translated into internal actions. The thesis confirms existing theories which claim that it is possible to decompose organisational capabilities into distinct, sequenced, hierarchically-ordered levels. But contrary to the literature which claims that only firms with higher-order ‘dynamic’ capabilities can succeed in changing environments, the thesis shows that multiple levels of capabilities can yield successful competitive performance for many years. Lastly, the thesis applies the concept of organisational learning mechanisms (Popper and Lipshitz, 2000) to investigate the process of capability development and argues that the structural and social facets, such as agent participation patterns and valuation of knowledge, are of particular importance in producing higher-levels of capabilities and more extensive organisational learning. The thesis contributes to the literature by showing that organisational capabilities are context-bound and idiosyncratic. They are a by-product of organisational life which comes not only through external factors and internal resources, but more importantly through managerial enactment, organisational mindset and learning mechanisms. It critiques existing theories based on the idea of organisation-environment alignment and proposes to introduce the idea of ‘envelopment’ which redefines the relationship between the organisation and its environment. The key idea is that within the same external environment, it is possible to have varying levels of firm dynamism and still to be able to maintain competitive advantage, without necessarily aiming for organisation-environment fit. This thesis contributes to the debates about the development and evolution of organisational capabilities by providing empirical support for the proposition of Zollo and Winter (2002) that there is a relationship between learning mechanisms and capabilities. As a result, it provides alternative insights into the genesis of organisational capabilities and the consequences of learning processes.
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