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臺大管理論叢
第
27
卷第
3
期
7
3.1 Capability
The concept of “capability” refers to the firmʼs resource deployment and ability to
implement an action during process competition. We follow Schmenner and Swink (1998)
and Swink and Hegarty (1998) and focus on two key capabilities: improvement and
innovation capabilities. “Improvement capabilities” are developed to carry out small-scale
changes using the firm’s existing physical assets and operating policy, such as enhancing
technology utilization (March, 1991) and waste reduction (Swink and Hegarty, 1998). In
contrast, “innovation capabilities” are characterized as the ability to pursue new
manufacturing approaches by targeting large-scale, radical process changes, which generally
require major structural changes in equipment and/or facilities (Schroeder, 2008; Eisenhardt
and Martin, 2000; Peng et al., 2008).
Scholars suggest that firms can simultaneously develop improvement and innovation
capabilities (Adler, Goldoftas, and Levine, 1999), but they require rather distinct resources
(Peng et al., 2008). Therefore, constrained by scarce organizational resources, firms often
make trade-offs between the two capabilities: improvement and innovation (Swink and
Hegarty, 1998; Rahmandad, 2012). The strategic decision of capability development trade-
offs can get more complicated in the presence of competition, as explained in the following
section.
3.2 Awareness and Motivation
In a competitive environment, full awareness is a prerequisite for process competition
initiatives (Chen, 1996). “Awareness” refers to the firm’s perception of the competitive
environment including major rivals. Fully understanding its rivals’ processes gives the firm
relative broad range of knowledge, which is necessary to anticipate the various consequences
of proposed process change actions. A firm with low awareness may underestimate the
competitive pressure imposed by rivals or allow a rival’s action to go unnoticed, hence
hinder its ability to attain anticipated outcomes (Tsai, Su, and Chen, 2011).
“Motivation” stimulates a firm to engage in process competition. A firm is likely to
make a commitment to a process change action when it perceives large gains from taking
action or great losses from non-action (Smith et al., 2001). Competitive tension is frequently
used to capture this decision-making threshold (Chen et al., 2007). Specifically, competition
favors a firmʼs bias towards improvement capabilities that pay off in the relative short term,
i.e., “short-termism” (Rahmandad, 2012). For instance in production planning and control,
reactive maintenance is chosen over preventive maintenance (Sterman, 2000), and