Prepared for the NZ Productivity Commission's Frontier Firms Inquiry Roundtable Discussion

1. New Zealand Frontier Firms: A Capabilities-Based Perspective
Prepared for the NZ Productivity Commission’s Frontier Firms inquiry
Roundtable discussion
Professor David J. Teece and Kieran Brown
BRG Institute
1

2. Agenda
1. Welcome – Murray Sherwin NZPC Chair
2. Opening remarks and introductions – Patrick Nolan
3. Briefing on the capabilities-based view – David Teece
4. Summary of report – David Teece and Kieran Brown
5. Key strategic questions / Q+A – Patrick Nolan
6. Close 1030
2

3. 3
The Capabilities-Based
View
Prof David Teece, Executive Director
BRG Institute

4. “The proximate cause of differences in
the wealth of nations lies, for the
most part, in the capabilities of firms”
- Prof. John Sutton, London School of Economics
Competing in Capabilities (2012)
4

5. Capabilities Drive Innovation and Economic Development
–Austrian-American economist Joseph Schumpeter said that the very essence of innovation is typically “new
combinations” of both technology and business models*
–Ordinary capabilities: The everyday work that companies do to execute a business plan. Much of the knowledge
behind ordinary capabilities can be secured through consultants or through a modest investment in training.**
–Dynamic capabilities: How a firm decides, in the face of deep uncertainty, which ordinary capabilities it will
need in the future, which new products and services to offer, and how best to organize for it
–Strong dynamic capabilities allow businesses to recognise emerging trends (sensing), execute (seizing), and
align (transforming).
5
* Schumpeter, J., The Theory of Economic Development (1934)
** Bloom, N., Eifert, B., Mahajan, A., McKenzie, D., & Roberts, J., "Does management matter? Evidence from India." Quarterly Journal of
Economics 128(1) (2013): 1-51.

6. Dynamic Capabilities as aTheory of Growth and Economic Development
Traditional economic development theory:
Investment leads to resource accumulation that combines (somehow) with labour to generate
growth*
–The problem, as one study noted, is that “if ... one marshals [inputs] but does not innovate and
learn, development does not follow”**
Dynamic Capabilities framework:
Firm-level entrepreneurship guides the innovation and learning necessary to determine the right
investments (value creation) and craft profitable business models (value capture).
–An entrepreneurial-managerial class can create and grow dynamically capable firms to fuel
economic development.
–New Zealand needs a new “Knowledge Wave” that focuses on acting, not talking***
6
* Kaldor, N., Capital accumulation and economic growth, in F. A. Lutz and D. C. Hague, eds., The Theory of Capital. St. Martin’s Press (1961).
** Nelson, R. R., and H. Pack,. The Asian miracle and modern economic growth, Economic Journal, 109(457) (1999).
*** From the Knowledge Wave to the Digital Age (2019) https://www.mbie.govt.nz/dmsdocument/5866-growing-innovative-industries-in-new-zealand-from-the-knowledge-wave-
to-the-digital-age

7. • Strategic “fit” over the long run
(evolutionary fitness)
• Sensing, seizing, and
transforming
• Difficult; inimitable
• Technical efficiency in basic
business functions
• Operational, administrative,
and governance
• Relatively easy; imitable
Ordinary
Capabilities
Dynamic
Capabilities
Doing things “right” Doing the “right” things
Summary: DynamicVs. Ordinary Capabilities
Tripartite
schemes
Imitability
Purpose
(Improvement) (Innovation)

8. The Dynamic Capabilities Framework is Central to the New
School of Strategy Focused on the Sustained Competitive
Advantage of Firms, and Nations
Sensing
Identification of
opportunities & threats at
home and abroad
Seizing
Mobilization of resources
to deliver value and
shape markets
Transforming
Continuous renewal and
periodic major strategic
shifts
“The ability of an organization and its management to integrate, build, and reconfigure internal and
external competences to address rapidly changing environments”
(Teece, Pisano, and Shuen, 1997: 516)
These higher-order capabilities fall into three categories:
8

9. A Capabilities Focus is Needed at Both the Policy
and Firm Levels in New Zealand
• Existing economic models of market economies ignore capabilities.
• A new model is needed for policy makers (and many businesses)
• Firms with strong capabilities can pay better wages, retain staff, and build even
better capabilities, in a virtuous cycle*
• It’s not easy
⎻ Capabilities are people-driven and “wooly”
⎻ Capabilities are organizationally embedded and hard to measure
⎻ Capabilities take time and attention to develop
* Abowd, J. M., McKinney, K. L., and Zhao, N. L., Earnings inequality and mobility trends in the United States: Nationally representative estimates from
longitudinally linked employer-employee data. Journal of Labor Economics 36(S1) (2018).
9

10. Dynamic Capabilities
Ordinary Capabilities
Frontier
“Wooly”
Issues
Long-Term
Importance
Based on UC Berkeley Nobel Laureate George Akerlof’s
“Sins of Omission and the Practice of Economics,” Journal
of Economic Literature, 58(2) (2020).
“Hard”
Degree of analytical precision
Low
High
Mental Models andTheirTradeoffs: Policymakers and
CEOs Alike…
10

11. To Understand Capabilities Requires New Mental
Models of Management and Policy
• Mainstream economics and management
• Favor “hardness” over importance*
• Emphasize operational efficiency over innovation and entrepreneurship
• Dynamic capabilities framework
• System-level approach to innovation and growth**
• Applicable to managers, firms, and national economies***
• Investment in the development of dynamic capabilities in the state and with policymakers can have a
positive impact on innovation
• Akerlof, G.A., Sins of Omission and the Practice of Economics, Journal of Economic Literature, 58(2) (2020).
** Teece, D.J., Dynamic capabilities as (workable) management systems theory. Journal of Management & Organization, 24(3) (2018).
*** Teece, D. J., Towards a capability theory of (innovating) firms: implications for management and policy. Cambridge Journal of Economics, 41(3) (2017).
****Kattel, R. and Mazzucato, M. (2018) 'Mission-oriented innovation policy and dynamic capabilities in the public sector', Industrial and Corporate Change, 27 (5),
pp. 787-801.
“The concept and practice of dynamic capabilities is perhaps the key missing
element in the search for the new generation of innovation policies” ****
– Prof Mariana Mazzucato, UCL
11

12. Frontier Firms: A Capabilities-
Based View
Summary of the report
Kieran Brown, Fellow
David Teece, Executive Director
BRG Institute
12

13. The Report Is a First Step
• We were asked to apply a Capabilities-Based View to the challenges, opportunities and
debates rising from the inquiry into New Zealand’s Frontier Firms
• Our scope from NZPC was limited, and therefore only secondary research informed this
report.
• We analysed the available literature, focusing on two key elements:
⎻ Firm level management, and
⎻ Corporate governance
• More primary and applied research needs to be undertaken on firm-level capabilities and
competitiveness in New Zealand.
13

14. New Zealand Has an Enduring Productivity Problem (Old News)
• After the GFC this poor productivity performance deteriorated even further, and
productivity growth remains lower than before the crisis
• NZ productivity growth has remained relatively low level by OECD standards. Per capita
income in New Zealand is about one-third lower than in Australia.
• Most GDP contribution in the last thirty years resulted from additional hours worked, not
productivity gains. New Zealand’s productivity remains 30% below the average of the top
half of the OECD.
• One drag on New Zealand’s productivity is its relatively low R&D to GDP spending, less
than half the OECD average and 21st worst overall. Private investment in R&D has been
shown to be directly linked to increases in productivity*
• And then the Covid crisis arrived….. We join other voices calling for bold action, to use
this crisis as a catalyst for transforming the New Zealand economy and its businesses
14
* Conway, P., “Can the Kiwi Fly: Achieving productivity lift-off in New Zealand”, International Productivity Monitor 34 (2018), available at:
https://pdfs.semanticscholar.org/0722/d491f87db02fbc9790ca460062c2864405dc.pdf

15. A)Firm-levelCapabilities:GeneralInsightsFromtheReport(DT)
• Firms with strong dynamic and managerial capabilities are more resilient
and more productive, allowing them to pay higher wages and support
innovative cultures*
• Specific firms with dynamic capabilities to orchestrate capital
reallocation have better ROA and AVA**
• Firms that export have greater exposure to competition
• The survivors become more competitive (productive)
• When addressing overseas markets, strong dynamic capabilities are
even more critical for survival
• Over-attention to managerial best practices (i.e., strong ordinary
capabilities) can measurably and predictably raise productivity but does
not guarantee future growth—and may, in fact, compromise it.
*Barth, E., Bryson, A., Davis, J. C., & Freeman, R., “It’s where you work: Increases in the dispersion of earnings across establishments and individuals in the United States”, Journal of
Labor Economics 34(S2) (2016): S67–S97
**Lovallo, D., Brown, A.L., Teece, D.J., & Bardolet, D., “Resource re‐allocation capabilities in internal capital markets: The value of overcoming inertia”, Strategic Management Journal
41(8) (2020): 1365–1380. 15

16. A)Firm-levelCapabilities:NewZealand (KB)
• Firms with strong dynamic and managerial capabilities are more resilient.
During the global financial crisis NZ manufacturing firms with strong dynamic
capabilities were more resilient, able to create new business models and
continually evolve and capture value from new offerings.*
• NZ managerial capability levels in manufacturing are in the middle rank with
Italy and Poland, below Japan, Germany, and Canada**
• NZ firms engage only modestly in international R&D collaboration.**
• Other weaknesses include international alliance building, operations and
human capital management, and tight inward locus of control***
• Management has a highly negative attitude to failure, a short-term
orientation, and avoidance of uncertainty which places limits on learning
cultures and innovation****
* Collins, S. Strategising for Resilience, PhD thesis, Victoria University of Wellington (2015), available at:
http://researcharchive.vuw.ac.nz/xmlui/bitstream/handle/10063/5035/thesis.pdf
** Green, R., et al., Management Matters in New Zealand—How does manufacturing measure up?, (2010), available at: http://worldmanagementsurvey.org/wp-
content/images/2010/07/Report_Management-Matters-in-New-Zealand-How-does-manufacturing-measure-up.pdf
*** Su, H.N., “Global interdependence of collaborative R&D-typology and association of international co-patenting”, Sustainability 9(4) (2017): 541.
**** Smale, T. (2008), The Influence of National Culture on New Zealand’s Innovation Outcomes MBA dissertation, Henley Management College, Henley-on-Thames, United
Kingdom.
**** Smale, T. (2008), The Influence of National Culture on New Zealand’s Innovation Outcomes MBA dissertation, Henley Management College, Henley-on-Thames, United Kingdom.
16

17. B)CorporateGovernance:ACapabilities-BasedPerspective(DT)
• A crucial, but often overlooked, component of firm capabilities is the board of
directors.
• There is a strong correlation between good governance (intellectual “diversity,”
some independence, effectively aligned long-run incentives and renumeration,
etc.) and firm-level performance and productivity.*
• The oversight role of boards is deeply entrenched in official regulations,
investor expectations and traditional, and largely outdated academic theory
• Agency theory paradigm dominates regulatory mindset, which sees the board’s
primary role as monitoring management’s performance to prevent
misappropriation and mistakes, while unaddressed opportunities slip silently by.
• The problem is that the board is so focused on policing managerial
opportunism and on “safety” that it distracts management from focusing on
sensing, seizing, and transforming.
*Deloitte and Nyenrode Business Universiteit, Good Governance Driving Corporate Performance (2016), available at:
https://www2.deloitte.com/content/dam/Deloitte/nl/Documents/risk/deloitte-nl-risk-good-governance-driving-corporate-performance.pdf
17

18. B)CorporateGovernanceinNewZealand(KB)
* Chapman Tripp, New Zealand Corporate Governance Trends (2019), available at: https://chapmantripp.com/media/qdbfq3zi/corporate-governance-trends-insights-2019.pdf
Institute of Directors & MinterEllisonRuddWatts, Always on duty: The future board (2019), https://www.iod.org.nz/resources-and-insights/publications/insights/always-on-duty-the-
future-board
** Koerniadi, H., & Tourani-Rad, A., “Does board independence matter? Evidence from New Zealand.” Australasian Accounting, Business and Finance Journal, 6(2), (2012), 3-18.
*** Ware, D., Great Expectations: what shareholders and directors expect from New Zealand public company boards. Thesis, Victoria University of Wellington (2016).
• The rules of contemporary governance tend to focus on overseeing ordinary
capabilities; there is no immediate penalty for ignoring strategic issues.
• Increase of board time on managing compliance/risk/regulatory burdens*
• Just over half of NZ directors are independent. A 2012 study into New Zealand
boards revealed independent directors add little to, or affect negatively, firm
value.** By design, they know less about the business, and they have weaker
incentives to back bold and risky innovations.
• Directors of listed companies in New Zealand overwhelmingly had specific
accounting or finance experience or had been CEOs themselves.***
18

19. KeyRecommendations(DT/KB)
1. Build dynamic capabilities at firm level
a) Hold a national summit on innovation, capabilities,
and competitiveness.
b) Create a cross-sector team involving managers of
private firms, researchers, experts and
policymakers.
c) Establish a pilot programme to help self-selected
firms run internal diagnostic assessments of
selected aspects of dynamic capabilities
d) Identify management capability gaps to be
addressed and then develop targeted
interventions.
Frontier Firms: A Capabilities-Based Perspective
* The UK Business Basics Programme launched by the government in 2019 set aside £9.2 million over a four-year programme to fund the identification, diffusion and adoption of
existing business practices and technologies that increase firm productivity. There are currently eleven trials and fifteen proofs of concepts underway in the UK. The programme is
delivered in partnership with Innovate UK and Nesta. https://www.gov.uk/government/collections/business-basics-programme
2. Develop policy and a competitive fund to support
building of ordinary capabilities at firm level
a) Develop a programme aimed at identifying,
acquiring and widely diffusing existing best-
practice ordinary capabilities and technologies.
Similar challenges funds are being
experimented with by the UK government.*
b) Strong monitoring and evaluation of the
experiments over time.
c) Government agencies could lead the
establishment of this programme with support
from a strong research institution and
management experts.
19

20. Keyrecommendations,cont‘d(DT/KB)
3. Develop stronger international orientation and better
cross-border networks and alliance building for New
Zealand managers
a) Dynamic capabilities also can be enhanced with a
focused international exchange and mentoring
platform for managers in New Zealand frontier
firms with foreign multinationals
b) This is not a one-off or “study tour”-type
arrangement, but one that needs high-level CEO
and Ministerial support for a deep multiyear
engagement that leads to enduring capability
improvements.
c) Need support from New Zealand’s largest listed
and exporting firms, which have existing
relationships with global multinational
corporations.
Frontier Firms: A Capabilities-Based Perspective
4. Evolve corporate governance to support dynamic
capabilities
a) Establish a “Long-Run Stewardship Programme”
for current and future directors in New Zealand
b) To support and challenge management
successfully, boards—especially the chair—
need their own separate resources to
commission strategic analysis, conduct research
and convene dialogue.
c) The Commission and the Institute of Directors
in New Zealand should establish this
programme jointly with a leading business
school, with involvement by existing (and high-
potential) directors in private firms and by legal
and strategy experts. 20

21. Theoryinaction:LeadersSpeakingDynamicCapabilitiesLanguage
• “It's not the big that eat the small, but the fast that eat the slow……we're a subscale market where there isn't the
strong competition that we see overseas. We are too passive and we are missing an opportunity to get organised and
achieve a lot more”
- Rod Drury, XERO Chairman, 2017 interview
• “There are decisions that can be made by analysis … Unfortunately, there’s this whole other set of decisions that you
can’t ultimately boil down to a math problem”
- Jeff Bezos, CEO of Amazon, cited in Deutschman, A. 2004. Inside the mind of Jeff Bezos. Fast Company,
https://www.fastcompany.com/50541/inside-mind-jeff-bezos-4
• “Apple has the ability to innovate ... and create magic... This isn't something you can just write a check for. This is
something you build over decades”
- Tim Cook, CEO of Apple, Apple reiterates its ability to “create magic”, in Taipei Times, February 14, 2013.
• “Through investing in bold innovation we enhance the capabilities of all our sectors, from the primary to the
secondary and service sectors”
- Prime Minister Helen Clark, NZ Innovation Week 2004
21

22. SuccessfulCEOsSeetheNeedforStrongDynamicCapabilities
• Given the effects of inertia, we need people to lean into the future even more than other
companies might. We’re trying to move large numbers of people to change their established
habits ... Once upon a time a company like ours might have made big strategic choices on an
annual or quarterly cycle. Today strategy is daily.
- Doug McMillon, CEO of Walmart, https://hbr.org/2017/03/we-need-people-to-lean-into-the-future
• At Netflix it has really been about, you know, tolerating some level of chaos and error, so that you
stimulate more innovation . . . but then the question is ... how do you not have the chaos
overwhelm you? ... The question is, can you manage through values and context, so everyone is
doing the right thing without central co-ordination? It’s the jazz metaphor versus the orchestra.
- Reed Hastings, CEO of Netflix, Financial Times, Sept.4, 2020, Reed Hastings: ‘Netflix is still in challenger
status’.
- The moment that we get information that we feel is going to be critical, we will make decisions
rapidly on that. That has been built now into the culture of building an organization where you’re
constantly iterating and you’re constantly testing ideas. You have to make sure that they line up
against the long-term vision. But you have to be nimble enough ... to be able to constantly be
evolving and veering the company in just slightly new directions.
- Aaron Levie, CEO of Box, Inc. https://www.mckinsey.com/industries/technology-media-and-
telecommunications/our-insights/aaron-levie-box-ceo
22

23. Europe(Still)NeedsStrongerDynamicCapabilitiestoBecomeMore
Competitive...AndSoDoesNewZealand
• “It is time for us to take stock and face the hard truth... What
threatens to crush us today is... a more intelligent use of skills”*
• [What Europe needs is] “the ability to transform an idea into reality
through... the talent for coordinating skills and making rigid
organizations flexible”* (i.e., strong dynamic capabilities)
• This is what New Zealand businesses need, too.
* Jean Jacques Servan-Schreiber, Le Défi Américain, 1967
23

24. I’ve Been BangingThis Drum forTwo Decades…
24
From my speech at the Catching the Knowledge Wave Conference in
Auckland 1-3 August 2001*
Implications for New Zealand: Challenges
• Quantity and quality of skilled management are relatively low.
• Secondary and tertiary education has not trained enough people with commercially
relevant skills.
• Entrepreneurs too often are loners with limited horizons and limited overseas
connections, and are frequently ignorant of the complexities of the global
marketplace in which they must succeed.
• Industrial structure may be too fragmented. Most small firms cannot afford the R&D
or professional management that is needed.
• Government policy uncertainty. By flirting with undoing reforms and with larger
government intervention, additional uncertainty has been created, which is the
enemy of long-run investment.
* An excerpt from the speech was published in the University of Auckland Business Review, 3(2)(2001), “Five steps to a better future”
https://cdn.auckland.ac.nz/assets/uabsknowledge/English/uabr-archives/2001-volume-3-issue-2/v3i2-knowledge-wave.pdf

25. I’ve Been BangingThis Drum forTwo Decades, cont’d
25
Opportunities for New Zealand
• Harness expats and their talents while addressing the “brain drain.”
• Restructure education: fix the incentive and governance issues across the
system, strive for excellence and relevance, and build stronger ties to industry
and external institutions.
• Strengthen management skills quickly. Upgrade management and innovation
education to the 21st century, and recruit more NZ expat managers.
• Encourage additional R&D spending.
From my speech at the Catching the Knowledge Wave Conference in
Auckland 1-3 August 2001*
* An excerpt from the speech was published in the University of Auckland Business Review, 3(2)(2001), “Five steps to a better future”
https://cdn.auckland.ac.nz/assets/uabsknowledge/English/uabr-archives/2001-volume-3-issue-2/v3i2-knowledge-wave.pdf

26. Strategic Questions to Discuss
1. Can we start to form a community of practice and scholarship
around building capabilities in New Zealand?
2. Is the timing right for New Zealand to stage a new “knowledge
wave” with capabilities of firms AND the state at the core?
3. Can we fashion a new aligned industrial / competition and
technology policy for New Zealand that is capabilities-centric?
4. How can public policy better allow dynamic capabilities to
flourish in both the public and private sectors?
26

27. 27
Open Q+A

28. For Further Details
• Teece, D. J. (2019). A capability theory of the firm: an economics and (strategic) management
perspective. New Zealand Economic Papers, 53(1), 1-43.
https://www.tandfonline.com/doi/full/10.1080/00779954.2017.1371208
• Teece, D. (2001). Five steps to a better future, University of Auckland Business Review, 3(2).
• Teece, D. J. (2016). Dynamic capabilities and entrepreneurial management in large organizations:
Toward a theory of the (entrepreneurial) firm. European Economic Review, 86, 202-216.
• Teece, D. J. (2017). Towards a capability theory of (innovating) firms: implications for management and
policy. Cambridge Journal of Economics, 41(3), 693-720. https://tinyurl.com/y5c4fdnw
• Teece, D. J. (2007). Explicating dynamic capabilities: the nature and microfoundations of (sustainable)
enterprise performance. Strategic Management Journal, 28(13), 1319-1350.
• Teece, D. J. (2014). The foundations of enterprise performance: Dynamic and ordinary capabilities in an
(economic) theory of firms. Academy of Management Perspectives, 28(4), 328-352.
• “The Dynamic Capabilities of David Teece,” interview by Art Kleiner in Strategy + Business (2013).
https://www.strategy-business.com/article/00225?gko=32b8d
• Teece,D. J., Raspin, P. G., and Cox, D. R. (2020). Plotting strategy in a dynamic world. MIT Sloan
Management Review
28

29. 29
Bonus slides

30. 30
Develop a New
Capabilities Language
NowYou Have the Flavour of What I’mTrying to Say,
We NeedTo…
…And a framework to help you understand dynamic
capabilities … which are essential to survival and growth in a
world of deep uncertainty

31. 31
ReducedFormVersionof“Seizing”

32. DynamicCapabilitiesareEspecially
ImportantTodayBecauseof VUCA
32
V = Volatility
U = Uncertainty
C = Complexity
A = Ambiguity
Caused by innovation, globalization,
and conflicts over the rule of law
• Firms without strong dynamic capabilities
stagnate, decline, and disappear

33. The lack of predictability and deep uncertainty in MMA is not unlike today’s
interdependent innovation-driven competitive global economy.
 Existing “rules” of competition are being changed
 Entirely new “rules” are invented (e.g. cloud computing, Amazon
Prime, internet of things)
 New players constantly emerging (e.g., mobile money, start-ups versus
the banks)
To succeed in this world, managers need to be entrepreneurs, and
entrepreneurs need to be (or find) managers too (e.g., Brin and Page found
Schmidt to be CEO of Google).
33
Deep Uncertainty Demands Entrepreneurial
Management … In Big Companies,Too

34. Dynamic Capabilities:
Big bold brassy bets
34
A New Paradigm
Who would have thought…
Dubai in the 1960s would become Dubai as we
know it today?
Amazon would go from selling books to
everything?
Britain would leave the EU?
SpaceX could be a commercial space company?
Apple would be the highest market cap firm in the
world?

35. SpaceX: Entrepreneurial Management in Action
35
• Technological and business futures are shaped by the ability to
imaginatively combine science, technology, and business.
• Silicon Valley entrepreneur Peter Thiel has remarked on the
difficulty of forming radical new combinations.
• On Elon Musk’s Tesla and SpaceX ventures, he notes that “what
was really impressive was integrating all these pieces together”
• This is “actually done surprisingly little today and so I think this
is a sort of business form that when people can pull it off, is
very valuable.”
• This “asset orchestration” and associated integration
is an essential element of entrepreneurial
management—and of dynamic capabilities.
Teece, D.J., Peteraf, M., and Leih, S. (2016.) Dynamic capabilities and organizational agility: Risk, uncertainty, and strategy in the innovation economy.
California Management Review, 58 (4).

36. FirmsAlwaysNeedOrdinaryCapabilities(“BestPractices”)
• Ordinary capabilities:
• Operational leadership
• Efficient manufacturing
• Effective marketing
• Necessary partnerships
• Keep you busy, but you can only afford low wages
36
*Teece, et. al., “Innovation, Dynamic Capabilities and Leadership,” California Management Review 61(1), p. 15 (August 2018).
ORDINARY CAPABILITIES: DOING THINGS RIGHT – BUT NO INNOVATION

37. FamousStrategistsAgreeThatOrdinary
CapabilitiesAreNotEnough
“Numbers alone confer no advantage.”
– Sun Tzu, 5th Century B.C. Chinese strategist
“It does not matter who is stronger....”
– Miyamato Musashi, 17th Century Samurai warrior-philosopher
37
HAVING LARGER FORCES HELPS BUT IT IS NOT DECISIVE.
STRATEGYAND CULTURE (MORALE) MATTERS.

38. ManyFirmsUseTheWrongTools;BusinessSchoolsOften
OveremphasiseInappropriateAnalytics
38
Certainty Risk Uncertainty Ambiguity Chaos/Ignorance
Newer/Tools/Approaches
Scenario Planning
Peripheral Vision
Total Risk Management
Real Options Analysis
Systems Thinking
Idealized Design
Legitimation Theory
Honing Institution
Complexity Theory
Cost Benefit Analysis
Net Present Value
Linear Programming
Point Forecasting
Optimization Theory
Utility Theory
Decision Trees
Bayesian Updating
Monte Carlo Simulation
Portfolio Theory
Stochastic Modeling
Insurance & hedging
Known Unknown Unknowable
Traditional Tools/Approaches
Domain of Ordinary Capabilities
Domain of Dynamic Capabilities

39. 39
TowardsaCapabilitiesTheoryoftheFirm
Contributions By
“Great Economists”
Subject Matter
Knight (1921) Uncertainty
Marshall (1919) Evolution
Penrose (1955) Resources
Schumpeter (1934) Disruption
Keynes (1936) Animal Spirits
Coase-Williamson (1937, 1975) Transaction Costs