COMPETENCIES, CAPABILITIES
AND TIME
TOWARDS A DYNAMIC
KNOWLEDGE-BASED THEORY OF
VALUE
DIME Network, Pisa
9 November 2010
Nick von Tunzelmann
Evolutionary perspective via Capabilities
 Throughout this presentation I shall be taking what to my way of
thinking is an evolutionary perspective on the production and
distribution of knowledge
 Start with statics before building up to dynamics – time is an issue I
have variously discussed at the (1) short-term level of ‘real time’; (2)
long-term level of secular change, based around education and
learning; (3) medium-term level of leads and lags in the system – long
waves, business cycles, etc.
 I shall be doing so through the concepts of ‘capabilities and
competencies’, often deemed to be synonymous, but I regard as quite
different
 Just think of the antonyms, incompetent
and incapable – evidently
N
dissimilar
2
Capabilities in speech; competencies in (other)
languages
 I regard myself as incompetent at speaking Italian, but not incapable of
doing so; given learning opportunities etc. and suitable attendant
circumstances I could pick it up. On the other hand I am becoming
incapable of speaking any language, even my native tongue (English)
 “Speech and swallowing disturbances [associated with PD]
Hypophonia: soft speech. Speech quality tends to be soft, hoarse, and
monotonous. Some people with Parkinson's disease claim that their tongue is
"heavy" or have cluttered speech.
Monotonic speech.
Festinating speech: excessively rapid, soft, poorly-intelligible speech.
Drooling: most likely caused by a weak, infrequent swallow and stooped posture.
Dysphagia: impaired ability to swallow. Can lead to aspiration pneumonia.”
(Wikipedia)

Nick von Tunzelmann, SPRU,
University of Sussex
3
Statics and Dynamics – weasel-words?
 Building from theory of ‘dynamic capabilities’, but both can be
regarded as what Fritz Machlup classified as ‘weasel-words’
 “Weasel words is an informal term for words and phrases aimed at
creating an impression that something specific and meaningful has
been said, when in fact only a vague or ambiguous claim has been
communicated. ” - Wikipedia
 OED gives as of US origin, first ref in 1900
 Weasels = unsavoury small animals which allegedly smell bad and dig
their way backwards out of their hide
Nick von Tunzelmann, SPRU,
University of Sussex
4
Statics and dynamics
 “For more than 20 years, I have been telling my students that one of
the widespread uses of ‘statics’ and ‘dynamics’ was to distinguish a
writer’s own work from that of his opponents ... Typically, ‘statics’
was what those benighted opponents have been writing; ‘dynamics’
was one’s own, vastly superior theory.” (Machlup 1959)
Nick von Tunzelmann, SPRU,
University of Sussex
5
Summary of (static) capabilities I
 All agents can be thought of as transforming inputs (of different
types) into outputs
 All agents deploy resource inputs with certain characteristics and
depend on their competencies and capabilities to generate
utility/profitability – AK Sen’s work on consumer capabilities etc.
 Capacities = competencies + capabilities
 Agents as organizations exist in order to carry out these
transformations using their specific capacities – the role of the firm
is to transform technologies into products (etc.) – taking and
recombining knowledge
Nick von Tunzelmann, SPRU,
University of Sussex
6
1. Functional dimension,
firm viewpoint
Nick von Tunzelmann, SPRU,
University of Sussex
7
2. Resource
dimension,
firm viewpoint
INDUSTRIES
SUPPLIER
FIRMS
ETC
INDUSTRIES
BUSINESS
SCHOOLS
ETC
ETC
MATERIALS
(WORKING
CAPITAL)
INDUSTRIES
OTHER
GOVERNMENT
MANAGERIAL
LABOUR
INDUSTRIES
UNIVERSITIES
OTHER
ETC
OTHER
INFRASTRUCT.
CAPITAL
INDUSTRIES
OTHER
OTHER
LABS
RESEARCH
LABOUR
FIRM x
INDUSTRIES
EDUCATION
SYSTEM
ETC
ETC
OTHER
R&D CAPITAL
(TECHNOLOGY)
INDUSTRIES
BANKS
SKILLED
LABOUR
ETC
INDUSTRIES
OTHER
PHYSICAL
CAPITAL
OTHER
HOUSEHOLDS
ETC
UNSKILLED
LABOUR
Note: Each rectangle (box) represents an Input-Output relationship for the resource specified
Input agents (suppliers) are listed down the vertical axis of each box
Directions of Output (demands) are listed across the boxes (same in each case)
The Industry relevant to Firm x is shown as the dotted column
Nick von Tunzelmann, SPRU,
University of Sussex
8
Summary of (static) capabilities II
 Each agent acts variously as producer, consumer and supplier
(actors)
 Capabilities are highly heterogeneous as between agents of similar
kinds (firms, consumers, etc.) – depends on their circumstances and
their abilities
 A key issue for heterogeneous firms is that of amalgamating
resource inflows in different ways (alignment) – the role of
management vs. the role of entrepreneurship (changing the
constraints)
Nick von Tunzelmann, SPRU,
University of Sussex
9
Schema for actors and capabilities
Technology
suppliers
Producers
Consumers
Level 1:
Characteristics
R&D possibilities
re techniques
Production
possibilities re
processes
Consumption
possibilities re
products
Level 2:
Capabilities
Supplier
heterogeneity
Producer
heterogeneity
Consumer
heterogeneity
Level 3:
Profitabilities /
Rewards
Technological
utility/profitability
Producer
profitability
Consumer utility
Nick von Tunzelmann, SPRU,
University of Sussex
10
Summary of Dynamic Capabilities
These are driven by the business ‘processes’ installed by the
firm (etc.)
Dynamic capabilities are a compound of accumulating
strengths (the Resource-Based View of management) and
good foresight (the Strategic Management view) – a key
issue is how to improve the latter – vision and leadership –
transformational rather than just transactional (JM Burns)
Nick von Tunzelmann, SPRU,
University of Sussex
11
Schema for Interactive capabilities
Actors:
Suppliers
Producers
Consumers
possibilities
Production
possibilities
Product
possibilities
Technological
capabilities
Producer
capabilities
Consumer
capabilities
IPR returns
Profitability
Utility
(technology)
S&T
Characteristics
Capabilities
Rewards
supply
demand
Knowledge exchange
Nick von Tunzelmann, SPRU,
University of Sussex
12
Summary of Dynamic Capabilities
 These complex resource and capability systems may be thought of as
determining the 'position' occupied by the producer firm (Teece et al.,
1997), or the 'segment' where individual consumers are located
 Schumpeterian context of ‘dynamic competition’ means the
environment (landscape) may be constantly changing – ‘paths’
 Formally, firms’ dynamic interactive capabilities represent the extent
to which the change in their capabilities vector influences or is
influenced by the change in the capabilities vectors of consumers
and/or suppliers, in real time – thus an interactive element and a timeconstrained one
Nick von Tunzelmann, SPRU,
University of Sussex
13
Competencies versus Capabilities
 Many scholars, even those claiming to be part of the evolutionary school, do not
distinguish between ‘competencies’ and ‘capabilities’ – I do, though my definitions
are not generally accepted
 ‘Competencies’ in my approach are learnt information (often certificated) – what one
is taught, whereas ‘capabilities’ involve learning processes oriented to (varieties of)
application
 Here I take ‘competencies’ to be enhanced resources, ‘capabilities’ to be enhanced
services (applications)
 Competencies are initiated mainly outside the firm (etc.), capabilities within it
 Competencies aim to be appropriate, capabilities to be appropriable
 Competencies reflect ‘potential’, capabilities are ‘realised’
 Capabilities tend to be relatedly complex (i.e. in breadth) but cognitively simple (in
depth), while the reverse applies to competencies
 But the distinctions can blur, and the two are interlinked over time, and in these leads
and lags often lie the ingredients of commercial success or failure
Nick von Tunzelmann, SPRU,
University of Sussex
14
Dynamic appropriation
IPRs and open innovation
Excess capacity – slack (Penrose, Brusoni et al.)
Dynamic scale and scope economies
Imperfect competition and agglomeration economies
Nick von Tunzelmann, SPRU,
University of Sussex
15
Role of suppliers, producers and consumers in
the IC industry
Supplier
Producer
Consumer
Characteristics
Basic R&D;
Specialist
process
equipment
Very demanding processing –
continual process innovation;
Very high costs of physical
capital, human capital
Miniaturization generates
speed, low power and
functionality;
Standard products embody
modularity or redundancy
Capabilities
Product design
architectures;
Process set-up
Miniaturization drives cost
efficiency, subject to yield –
Moore’s Law
Redundancy caters for different
needs;
Availability of partially
customized products
Rewards
Design IPRs;
Equipment
monopolies
Efficiency does not
guarantee profitability –
role of other functions
Ever-widening range of
applications;
Gain from miniaturization
despite redundancy
Nick von Tunzelmann, SPRU,
University of Sussex
16
Food-processing industry –
changing consumer landscape
1) globalisation of tastes - rapid diffusion of hamburgers, soft drinks;
2) rising incomes and mobility - increasing consumption of ethnic and
exotic foods;
3) rising female employment - spread of readymade meals and onceweekly shopping and hence storable foods;
4) increased stress - resort to ‘grazing’ and consumption of fast foods;
5) older age distributions - rising consumption of health and functional
foods;
6) growing environmental concerns about packaging and pesticides increasing consumption of organic goods, etc.
Nick von Tunzelmann, SPRU,
University of Sussex
17
Food-processing industry –
changing technology landscape
These changes in consumer capabilities require
changes in producer capabilities for ‘dynamic
capabilities’
Rising complexity of technology inputs
Full range of new technologies - pharmaceuticals,
biotechnology, advanced instrumentation, IT, smart
materials
Production processes now aim at scale economies in
real time
Nick von Tunzelmann, SPRU,
University of Sussex
18
Food-processing industry –
changing technology landscape
Shift to product innovation in the industry
Role of supermarket chains (large retailers) in
focusing consumer wants – safety, quality and
variety
Competitive advantage comes from demand
differentiation (upgrading) and leverage, dynamic
advantage from harnessing new technologies and
reputation
Nick von Tunzelmann, SPRU,
University of Sussex
19
Coupling technologies and products ‘alignment’
By implication, new technologies for such industries
(including services) are usually generated externally,
in the high-tech fields
The issue becomes not just how to maximise
interactive learning (through network development)
but how to orient it in the ‘right’ directions, between
laboratories, firms and markets
The problem is exacerbated as one moves upstream
to the creation of human capital and science –
getting universities etc. to provide the ‘right’ research
20
and teaching
Coupling technologies and products ‘alignment’
Disconnects are highly likely – the key policy
concern then becomes overcoming ’network failure’
‘Alignment of networks’ likely to require
involvement by ‘joined-up government’ –
entrepreneurial government capabilities to formulate
and implement appropriate alignment policies
Nick von Tunzelmann, SPRU,
University of Sussex
21
Role of government in alignment
Need to operate through demand as well as supply factors,
including macroeconomic policy
an ‘evolutionary macroeconomics’?
Need to promote interactivity of knowledge, and in ‘real
time’
regional systems of innovation rather than static clusters
Need to have policy capabilities to make connections,
through ‘policy learning’ (internal and external)
Need to show ‘vision’ as a beacon to industrial entrepreneurs
– but consensual
the E-M-U vision in East Asia (electronics, mobile, ubiquity)
Nick von Tunzelmann, SPRU,
University of Sussex
22
Revolutions in technology
and governance – coevolution
Approx Dates
Location
Technological
Paradigms
Automation
Process type
Size of Firm
Advantages
Organization
Industry Structure
Type of Capitalism
Mode of
Governance
1st Industrial Rev
1750-1815
UK
machinery
steam power
iron
of Transformation
Labour
Small
Specialization
2nd Industrial Rev
1870-1914
USA, Germany
chemicals
electricity, oil
steel, plastics
of Transfer
Capital
Large
Internal Integration
Entrepreneurial
Competitive
Proprietorial
Markets
Multidivisional
Oligopolistic
Managerial
Hierarchies
Nick von Tunzelmann, SPRU,
University of Sussex
3rd Industrial Rev
1973-USA, E Asia
ICTs, biotech.
(nuclear)
smart materials
of Control
Information
Mixed
External
Integration
Networked
Mixed
Collaborative
Networks
23
Towards a new knowledge-based
theory of value
1) Measurement problems
2) Cambridge-Cambridge issues
Is it worth it?
Nick von Tunzelmann, SPRU,
University of Sussex
24