Introduction 33

Organizations are in a permanent struggle between stability and change, seeking to balance efficiency and flexibility in order to perform and persist in the face of competition (March, 1991; Davis et al., 2009; Lavie, Stettner and Tushman, 2010). This struggle between stability and change is reflected in the operating routines of an organization (March and Simon, 1958; Cyert and March, 1963; Nelson and Winter, 1982; Winter, 2003): While many operating routines are de- signed to deliver stable and efficient performance, competitive environments may require repeated and extensive changes to these routines. Failure to change oper- ating routines in the face of changed environmental circumstances is likely to jeopardize organization performance and survival (Tushman and Anderson, 1986; Leonard-Barton, 1992; Danneels, 2011). To explain how organizations achieve such adaptation, recent research emphasizes the importance of meta- routines as drivers of change in operating routines (Collis, 1994; Eisenhardt and Martin, 2000; Zollo and Winter, 2002). Whereas operating routines describe the way an organization carries out its day-to-day business, meta-routines are aimed at creating, extending, and/or modifying operating routines (Winter, 2003). Meta- routines constitute an organization’s dynamic capabilities that prevent the rigidity and the drawbacks of operating-routine stability; in other words, they prevent the generalization and misapplication of outdated operating routines in the face of changed circumstances (Teece and Pisano, 1994; Teece et al., 1997; Romme et al., 2010).

Despite researchers’ growing attention to dynamic capabilities and their influ- ence on change in operating routines, comparative empirical analysis on what types of dynamic capabilities cause such change is lacking (cf. Barreto, 2010; Di Stefano et al., 2010; Parmigiani and Howard-Grenville, 2011). This lack of em- pirical research exploring the connection between types of dynamic capabilities and operating routine change has hindered a reconciliation of the fundamentally different and contradictory conceptualizations of dynamic capabilities in the lit- erature (Arend and Bromiley, 2009; Barreto, 2010; Vogel and Güttel, 2013). The most influential conceptualizations significantly differ with regard to the bounda- ry conditions, core elements, and characteristics of the dynamic-capabilities con- cept: While Teece et al. (1997) theorize that dynamic capabilities apply only in rapidly changing environments, Eisenhardt and Martin (2000: 1106) argue that dynamic capabilities “take on a different character” in moderately dynamic envi- ronments (Peteraf et al., 2013). Conceptual contradictions are mirrored in empiri-

cal research, which tends to follow one of these dominant perspectives (Di Stefa- no et al., 2010; Peteraf et al., 2013). More specifically, quantitative research in each camp focuses on testing the impact of predefined dynamic capabilities types on organizational outcomes (e.g., Marcus and Anderson, 2006; Drnevich and Kriauciunas, 2011; Protogerou et al., 2012). Qualitative research focuses on de- scribing how a single or a few companies alter their operating routines (or fail to do so) by leveraging firm-specific dynamic capabilities (e.g., Galunic and Eisen- hardt, 2001; Rindova and Kotha, 2001; Danneels, 2011).

While both theoretical perspectives and their respective empirical work have yielded valuable insights, we still lack knowledge about what commonalities dy- namic capabilities exhibit across organizations that allow them to effect change in operating routines and what boundary conditions may drive idiosyncratic exe- cution. Failing to consider different types of dynamic capabilities and acknowledge their equifinal outcome hampers our theoretical understanding of dynamic capabilities and is unlikely to resolve some recent puzzling empirical results. For example, quantitative studies that evaluate different levels of envi- ronmental dynamism have shown that dynamic capabilities are of value in both dynamic and less-dynamic environments (Drnevich and Kriauciunas, 2011; Pro- togerou et al., 2012). This is a puzzling finding, because the dominant conceptu- alization proposed by Teece et al. (1997) denies any benefit of dynamic capabili- ties under conditions of low environmental dynamism. While such empirical findings imply that distinct types of meta-routines are contingent on environmen- tal dynamism and equifinally lead to changes in operating routines, empirical research has shown little effort to engage in their comparative exploration.

This chapter seeks to address this research gap by employing fuzzy-set Qualita- tive Comparative Analysis (fsQCA) to quantitative data collected from small- and medium-sized enterprises (SMEs) in order to study how dynamic capabilities effect changes in operating routines. In doing so, we explore the logical links among environmental dynamism, dynamic capabilities, and change in operating routines. More specifically—using fsQCA—we explore what configurations of environmental dynamism; execution frequency; and codification of higher-order sensing, learning, and reconfiguring routines represent necessary and/or suffi- cient explanations for change in operating routines. Our analysis reveals four dis- tinct types of dynamic capabilities: experiential, reactive, programmed, and ana- lytic. While experiential, reactive, and programmed-type dynamic capabilities cause operating routine change in environments characterized by high levels of dynamism, we find that analytic-type dynamic capabilities cause operating rou- tine change in environments exhibiting low levels of dynamism. Taken together,

this study advances research on dynamic capabilities and routine change by providing a framework integrating different and seemingly contradictory types of dynamic capabilities. We therefore provide researchers with a more complete and accurate view of dynamic capabilities by contributing theoretical understanding and empirical evidence on the balancing of operating routine stability and change in present-day organizations.

In the next sections, we introduce the theoretical foundations of our exploratory study. In order to better understand the context of our study, we review the litera- ture on operating routines and dynamic capabilities (Nelson and Winter, 1982; Teece et al., 1997; Eisenhardt and Martin, 2000). We elaborate on dynamic capa- bilities as exogenous triggers of change in operating routines (Zollo and Winter, 2002; Winter, 2003). Then we provide information on our empirical data. We analyze this data using fsQCA. Finally, we present our results, discuss our find- ings, and highlight the implications and limitations of this work.