Dynamic Capabilities and the Speed of Strategic Change: Evidence From China

Despite the general agreement of the importance of resources and capabilities to strategic change, the broader question of how resources and capabilities affect strategic change itself remains unresolved. This research focuses on one characteristic of the process of strategic change, i.e., its speed. This study investigates the relationship between dynamic capabilities, the speed of strategic change, and performance. We propose that technological capabilities, marketing capabilities, and market-linking capabilities, due to their absorptive capacity and boundary spanning attributes, will facilitate the speed of strategic change. Furthermore, the risk orientation of managers will moderate this effect such that it would be strengthened for relatively risk-taking managers. Finally, we argue that the speed of strategic change will have an inverted-U relationship with organizational performance. We test these hypotheses on a sample of 213 Chinese firms and find that while dynamic capabilities facilitate rapid strategic change, the risk orientation of decision makers moderates this relationship, but not all as hypothesized. While faster implementation of strategic change has a positive effect on performance, strategic change carried out too quickly has negative performance repercussions. Our findings suggest that firms not only need to adjust strategies to complement the changing environment, but also have corresponding capabilities to enable rapid strategic change.