Digitalization and Dynamic Capabilities in the Automotive Industry – Measuring discontinuous change abilities of automotive suppliers with a Dynamic Capability Index

Type de publication:

Conference Paper


Gerpisa 2018 - Who drives the change? New and traditional players in the global automotive sector, University of São Paulo - School of Economics, Business and Accounting (2018)


Digitalization and Dynamic Capabilities in the Automotive Industry – Measuring discontinuous change abilities of automotive suppliers with a Dynamic Capability Index

Digitalization spans all industries and is considered to be one of the most sweeping technolog-ical changes of our time (e.g. Baker, 2015: 14), especially in the very capital intensive automo-tive industry (Köhler/Wollschläger, 2014). It is not considered solely to be an enabler and driver of improvements or incremental changes in individual processes along the value chain (BMWi, 2015: 11), but also of individual performances to the extent of individualized and integrated mobility solutions and individual business models (Köhler/Wollschläger, 2014; Kane et al., 2016). Furthermore, digitalization can shift the industry boundaries from automo-tive to mobility businesses, change competition (Porter/Heppelmann, 2014) and therefore lead to greater and agility and speed of entrepreneurial business activity in entirely new value sys-tems (Hamidian/Kraijo, 2013: 12). Apart from companies such as, e.g., Apple in highly dy-namic environments (cf. Wentzel, Koch 2017), digitalization as a rule therefore causes discon-tinuous changes (Kane et al., 2016). These are predictable in their results, but not always in the course they will take, partly because they can extend over a long period (cf. Liesenköt-ter/Schewe, 2013). The previously only incrementally changing environment of the automotive industry is now challenged by discontinuity (e.g. Nadler/Tushman, 1989: 196) or instability (Klein, 1977) of market dynamics (Davis et al., 2009) with increasing information deficits and therefore uncertainty for automotive companies (cf. e.g. Miliken, 1987; Schrader et al., 1993).

In times of digitalization, the issue is not so much technologies, but rather strategies and new ways of thinking (Rogers, 2016). In order to exploit the technological changes for competitive advantages in the market, automotive companies must above all develop or activate capabili-ties with which they can adapt their resource base to the changes over time. Attempts have been made for almost two decades to explain such "dynamic capabilities" (among others Teece et al. 1997, Eisenhardt/Martin 2000 or Peteraf et al. 2013) by making the resource-based ex-planations of sustainable competitive advantages dynamic (through value-creating resources with limited tradeability and imitability; e.g. Barney 1991; Peteraf 1993). However, the con-cept and research field of dynamic capabilities remained unclear for a long time (cf. Winter 2003) and ambiguous (cf. Zahra et al., 2006). This is partly because dynamic capabilities are not always understood as transformational abilities (Teece et al. 1997; Teece 2007) or "capabil-ities" (Winter, 2003) and therefore as latent actions, but also as processes or routines (cf. Ei-senhardt/Martin 2000 or Aragon-Correa/Sharma 2003).

Attempts at integration are now being made, e.g. by Peteraf et al. (2013), Di Stefano et al. (2014) or Teece (2014). According to Teece (2017, p. 1), "dynamic capabilities […] the firm's ability to integrate, build, and reconfigure internal competences [or ordinary capabilities] to address, or in some cases to bring about, changes in the business environment". As a result, according to Teece (2007) dynamic capabilities enable the "sensing and shaping" of strategic opportunities in a changing environment" ("sensing and shaping of opportunities"). They help in grasping these opportunities ("seizing of opportunities") and finally in adapting ("reconfig-uring") the "ordinary capabilities" (Teece 2007), which are also described as "operational capa-bilities" (Helfat/Winter 2011), "zero-order capabilities" (Danneels, 2015) or "competencies" (Teece, 2017).

For dynamic capabilities are very difficult to operationalize (cf. Ambrosini/Bowman, 2009; Arend/Bromiley, 2009; Vogel/Güttel, 2013), this paper now develops a “Dynamic Capability Index” (DCI) to enable estimates of the reactivity of automotive companies to the discontinu-ous change caused by digitalization. It is based on the operationalization of the dynamic capa-bilities of Teece (2007), so that questions on the dynamic capabilities of "sensing", "seizing" and "reconfiguring" are rated on a scale of one to seven and the results totaled to form the index. An average is calculated for these three blocks of questions and shown in a spider dia-gram (Fig. 1).

Fig. 1: Basic principle of the Dynamic Capability Index

The DCI enables automotive companies a cross-sectional view of the dynamic capabilities of companies at a single point in time and can be used as a benchmark tool when the change ca-pabilities of one company are compared to a benchmark company and the average of all com-panies surveyed. The evaluation survey activities, which are supposed to be proxy for dynamic capabilities. The activities are requested for the last ten years, because self-assessment of present capabilities usually involves overestimation. The questions are reduced to digital activities to increase the validity of the index.

In this study, the Dynamic Capability Index of discontinuous change in the context of digitalization is developed and surveyed at 96 German automotive supply companies. The Index shows that sensing and seizing capabilities are already deployed at many automotive suppliers, but that there are still very major deficits in the reconfiguring of ordinary capabilities. The causes are, on the one hand, the fact that the automotive suppliers underestimate the impacts of digitalization, and on the other hand, that many of them are still investing far too little in ordinary capabilities and are therefore not yet developing new digital business models and value systems.

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