The development of capabilities during firm growth

Paper in proceeding, 2007

A major research strand within strategic management research views the firm as composed of firm-specific capabilities that may result in competitive advantages and firm growth. Most empirical and theoretical research within capability based strategy research focuses on established firms with inherited capabilities and examines the process of gradual change. Few studies have empirically explored the transformation of individual resources into organizational capabilities and the related firm growth from the very beginning. This paper explores and attempts to explain the transformation of individual resources into capabilities by using case studies set in the bioscience industry. More explicitly, this paper focuses upon the transformation and emergence of organization within growing science-based firms. Thus, the purpose is to explore if and how capabilities are formed from separate resources by analysing eight bioscience firms during their growth processes. The paper finds that a) the firms within the bioscience industry started with very different resource endowments, b) these firms were initially characterised by rather atomistic resources, c) the continued resource accumulation during further growth and expansion followed different pathways, d) the firms all went through a general processes of capability development, and that these processes were found within all these firms during firm expansion. These processes are here described by two broad themes. The first theme focuses around the processes leading to internal development of firm specific knowledge and an increasing specialization of individual employees. The second theme relate to processes around the development of a supporting context to the performed focal activities.