Integrating Dynamic Capabilities and Industry Structure

Recent debates on the microfoundations of strategy have reignited discussions about what are the true determinants of performance heterogeneities in firms when factors of production are tradable. According to the “structure-based view” of performance, the way a firm fits into the industry structure is seen as the primary source of competitive advantage. On the other hand, the “strategy-based view” contends that process-based aspects of firms should be accorded far more importance in the study of the determinants of performance than macro, structural indicators. While research in both these fields has added immeasurably to our understanding of inter-firm heterogeneity, there has been little attempt at integrating the wisdom from their collective findings. In this paper, we attempt to place the two fields in an integrative framework, arguing that linking the research on the strategic variables with structural research can explicate a number of unexplained facets of firm performance.