DYNAMIC CAPABILITY IN RECESSIONAIRY TIMES:

Abstract

Scholars of the resources-based view argue that capabilities are an important cause for heterogeneity between businesses. Therefore, capabilities have the interest of researchers. Dynamic capabilities have particular interest because they can lead to a competitive advantage. There is limited research on the role of dynamic capabilities during a recession. A recession puts business models under pressure. This pressure increases the importance of making good well informed decisions. This study investigates the effect of the capability allocation policy on organisational performance after a recession using a system dynamics simulation model. The model is based on existing simulation models and combined these models to derive new insights. The study found that increasing allocation toward dynamic capabilities during a recession can lead to higher organisational performance. In addition, the study found that a recession can offer opportunities to develop a dynamic capability. Thereby, it shows that the customer retention in the market is important to consider when a business decides its capability allocation strategy.