Abstract:
The dynamic capabilities framework is suggested as a means to explain how a firm can achieve sustained growth through endogenous means (Helfat et al, 2007; Teece, Pisano, & Shuen, 1997; Teece, 2009; Zollo & Winter, 2002). Dynamic capabilities are underpinned by internal firm processes that enable a firm to sense and seize internal and external opportunities, and transform their resources to ensure a sustained competitive advantage. Dynamic capabilities though, have a shortcoming in that they are difficult to understand, hard to identify, and are vague (Eisenhardt & Martin, 2000; Kraatz & Zajac, 2001; Kuuluvainen, 2012; Winter, 2003). Despite some recent studies on how dynamic capabilities influence superior firm performance these are limited in scope and of limited applicability to a New Zealand context. The research on how dynamic capabilities influence firm growth was conducted on engineering firms operating in the NZD18 billion New Zealand energy industry. The context was chosen as many of these firms are New Zealand small to medium enterprises (SMEs), of 250 full time employees or less (OECD, 2004) and subject to market demand factors largely outside of their control. As SMEs contribute significantly to job and economic growth (Dobbs & Hamilton, 2007; MED {MBIE}, 2011b) this outcome is expected to contribute to New Zealand’s employment and financial sustainability. In response to calls to examine which dynamic capabilities (if any) influence sustained firm growth this thesis developed a qualitative research methodology, with the use of visual aids, with which to operationalise dynamic capabilities and examine their influence on firm growth. The research finds that sensing and seizing capabilities contribute to sustained growth when the market offers growth opportunities and the firm is declining in profitability. Transformational capabilities contribute to sustained growth when the firm experiences declining market opportunities and firm profitability. Surprisingly, when the market offers growth opportunities and the firm is in a profitable situation, firms that used this situation to transform their resources, were able to sustain their growth.