Abstract

How dynamic capabilities emerge and evolve in an organization has been a central inquiry in the literature on dynamic capabilities. Applying the lens of co-evolutionary dynamics, we explore how an organization undertakes strategic renewals and uses organizational routines in order to facilitate technological innovation, leading to the emergence of dynamic capabilities. We discuss our qualitative case study of the sequential strategic renewals that enabled a specialized semiconductor foundry (Taiwan Semiconductor Manufacturing Corp., TSMC) to transform from a technology-latecomer to a technology-leader. TSMC's co-evolutionary dynamics for technological innovation started in the creating phase of mature process-innovation (1987-1998), evolved to the extending phase of advanced process-innovation (1999-2001), and then to the modifying phase of product innovation (2002-2007). Each phase illustrates the role of variety-inducing and variety-reducing organizational routines and their interactive patterns co-evolving with core strategies of technological innovation. We show how the organizational mechanisms for the formation and transformation of dynamic capabilities in the TSMC case follow cross-sectional Y-paths and longitudinal Z-paths. Finally, we discuss our research contributions and the managerial implications that can be drawn from our research.  

Keywords

dynamic capabilities strategic renewal organizational routine