Strategizing through the capability lens: sources and outcomes of integration

Purpose - This paper aims to explore the concept of capabilities and where they come from as well as their impact on integration and performance. Design/methodology/approach - The paper is presented in the form of a theoretical development and literature review. Findings - This paper proposes a theory of capability development and discusses the conditions under which a capability is effective. In particular, for a capability to be effective both local and global coherence are required. But a capability effectiveness and coherence has an inverted U shape. It increases with coherence up to a certain threshold then decreases. As a result, the development of capability is a powerful integration mechanism that crosses levels and functions. Research limitations/implications - This is a theoretical paper; the propositions offered have still to be empirically tested. Practical implications - Opening up the capability black box might help managers better grasp how to develop and shape organizational capabilities that are deemed to contribute to competitive advantage (e.g. the pricing capability). First, capabilities are not to be equated with competitive advantage. They may lead to a competitive advantage only where the context is favorable. Thus consistency with the environment challenges is an important factor to watch. This suggests that managers should give attention to the relationships between what they perceive to be their capabilities and the nature of the challenges faced by the organization. Further this research might promote the development of tools to measure coherence within a context and manage appropriate levels of dissent to trigger the re-shaping of existing capabilities or the emergence of new one. Originality/value - The paper bridges highly theoretical questions with practical considerations.