Content area
Full Text
1 Introduction
The strategic dimensions of an organization have been identified as managerial and organizational processes, the organization's resources and present position, and the path(s) available to the organization ([47] Teece and Pisano, 1994). This paper builds upon the theory of organizational inertia, understanding an organization's resources, processes, and path dependencies to constitute the source of organizational inertia ([15] Gilbert, 2005; [45] Sydow et al. , 2009). Traditionally, inertia is defined as the inability to enact change in the face of significant external change ([35] Miller and Friesen, 1980). Thus, inertia has meaning only in relation to some external factor: it refers to the relative speed of organizational change in response to external change and to the relative speed in which an organization is able to obtain, process, and evaluate information from its environment ([46] Steen, 2008).
Organizational inertia is often responsible for the demand for dynamic capabilities ([44] Schreyogg and Kliesch-Eberl, 2007). Dynamic capabilities reflect an organization's ability to achieve new and innovative forms of competitive advantage despite path dependences and core rigidities in the firm's organizational and technological processes ([48] Teece et al. , 1997).
The definition of a capability as a set of routines implies that, in order for the performance of an activity to constitute a capability, it must have reached some threshold level of practiced or routine activity. In order for something to qualify as a capability, it must, at minimum, work in a reliable manner ([25] Helfat and Peteraf, 2003). As a consequence, organizations are faced with a dilemma: on one hand, there is pressure to develop reliable patterns of selecting and linking resources in order to attain superior performance and competitive advantage, and, on the other hand, this very endeavor risks - at least in volatile markets - restricting the organization to these capabilities ([44] Schreyogg and Kliesch-Eberl, 2007).
This paper aims to examine how organizational inertia in small and medium enterprises (SMEs) inhibits the effectiveness of dynamic capabilities in a volatile environment. The research questions are based on the assumption that organizational inertia moderates the interaction between dynamic capabilities and organizational performance.
This study proposes a conceptual SME dynamic capabilities and organizational inertia interaction model, contributing to our understanding of organizations' utilization of dynamic capabilities in a...