Managing Strategic Capabilities. A Case Study of Volvo Car Corporation.

Paper in proceeding, 2003

Abstract This paper reports a case study of the evolution and management of capabilities in Volvo Car Corporation (VCC), in which we apply a process perspective on capabilities. The purpose is to contribute to the understanding of the dynamics of capabilities as well as the management of their relations to parallel capabilities and on business activities. Data sources have been approx. 35 interviews with executives as well as archival documentation. Theoretically, the framework is based on capability theory as well as the strategy process perspective. We stud-ied three potential capabilities (officially communicated by VCC as “core values”); safety, environmental care (EC) and quality. In terms of “capability management”, the case findings suggest that existing theory take into account that the development of capabilities can be di-rected by conscious, consistent managerial intervention. The norms and values of the product market, and even more so the norms and values of the factor market, strongly influence the character of capabilities. Furthermore, given the incremental magnification of capabilities, parallel capabilities will over time reach a state of conflict. When resources are limited, the marginal investment will go into existing capabilities, and path dependence is a significant risk.