1. T HE RELEVANCE OF THE DYNAMIC CAPABILITIES CONCEPT IN LOW AND HIGH - TECH SECTORS : A N EMPIRICAL A PPROACH Aimilia Protogerou and Yannis Caloghirou Laboratory of Industrial and Energy Economics, National Technical University of Athens

2. M AIN AIM AND POSITIONING OF THE PAPER AND THE CURRENT DC S D EBATE Despite the intense research work related to the Dynamic Capabilities (DCs) framework there is still no general agreement on the DCs construct and boundry conditions among scholars Empirical work remains limited, with sparse and disjoint empirical findings ( e.g. Zahra et al., 2006; Ambrosini and Bowman, 2009; Wu, 2010, Peteraf et al., 2012) 2

3. M AIN AIM AND POSITIONING OF THE PAPER IN THE CURRENT DC S DEBATE Taking into consideration that there is significant variation in the literature regarding the kind of external business environments that are relevant to DCs: many scholars clearly suggest that DCs are synonymous to rapidly changing conditions (e.g. Teece, 1997; Teece 2007), some acknowledge their role in moderately changing environments (e.g. Eisenhardt and Martin, 2000; Helfat et al., 2007), others choose not to include environmental conditions in their research (e.g. Makadok, 2001) this paper empirically explores the role of DCs on young firms’ performance in two distinct environmental conditions i.e. high and low-tech sectors. 3

4. A WORKING D EFINITION OF DC S Dynamic capabilities can be defined as “the capacity of an organization to purposefully and systematically create, extend or modify its resource base”(Helfat et al., 2007). “Creating” a resource includes all forms of resource creation, such as obtaining new resources through acquisitions and alliances, as well as through innovation and entrepreneurial activity. “Extending” their resource base may result in promoting growth in an ongoing business. “Modifying” their resource base includes any reaction to change, e.g. response to external environment changes 4

5. D YNAMIC CAPABILITIES IN LOW - TECH SECTORS Much theoretical and empirical research on DCs has been focused on large, established firms operating in high-tech sectors However, frequent use of DCs can also be justified in moderately changing environmental contexts (e.g. Eisenhardt and Martin, 2000; Helfat et al., 2007; Helfat and Peteraf, 2009), mature, traditional industries although not dynamic by definition they cannot be characterized as perfectly stable contexts as they have to confront major elements of change in the global arena such as globalization, trade liberalization, changing industry structures and regulations, increasing social pressures and the recent financial crisis DCs can apply both to newly formed as well as to established organizations (Helfat et al., 2007) 5

6. D YNAMIC CAPABILITIES AND YOUNG FIRMS Limited attention on young firms (McKelvie and Davidsson, 2009; Zahra et al, 2006 ) because it is assumed that established firms with their size and age ensure an adequate organizational structure and the required resources to develop and exercise dynamic routines. Nevertheless, DCs can be important to young firms’ survival and growth by expanding their limited set of resources and/or by reconfiguring their resources to adapt to technology changes, uncertain markets, better resourced rivals or even to internal organizational changes. 6

7. T HE DATA ORIGINATE FROM THE AEGIS P ROJECT SURVEY High & medium-high tech manufacturing firms425 Low & medium-low tech manufacturing firms1288 Total1713 Telephone interview with one of the firm founders in 10 European countries (2011) Sample firms: young independent entities founded between 2001 and 2007 with an average age of 7.1 years (min: 4; max: 11 years) Distribution by sector group Survey design 7

8. T HE SECTORAL DIMENSION : S ELECTED HIGH - TECH S ECTORS ( OECD CLASSIFICATION BASED ON TECHNOLOGICAL / RTD INTENSITY ) Selected SectorsNACE (rev. 1) High-technology manufacturing sectors Aerospace 35.3 Computers and office machinery 30 Radio-television and communication equipment 32 Manufacture of medical, precision & optical instruments (scientific instruments) 33 Pharmaceuticals 24.4 Medium to high-technology manufacturing sectors Manufacture of electrical machinery & apparatus 31 Manufacture of machinery and equipment 29 Chemical industry (excl pharma) 24 8

9. T HE SECTORAL DIMENSION : S ELECTED L OW - TECH S ECTORS (OECD CLASSIFICATION ) Selected Sectors NACE (rev. 1) Low-technology manufacturing sectors Paper and printing21,22 Textile and clothing17, 18, 19 Food, beverages and tobacco15+16 Wood and furniture20+36.1 Medium to low technology manufacturing sectors Basic metals27 Fabricated metal products28 9

10. T HE DYNAMIC CAPABILITIES CONSTRUCTS INDICATORS (1) New product development capabilities Capability to offer novel products/services Capability to adapt products/services to the specific needs of different customers/market niches Marketing and promotion activities Market sensing capability Adaptation of best practices Rapid response to competitive moves Change of practices based on customer feedback Frequent consideration of the consequences of changing market demand Quick recognition of shifts in the market Quick understanding of new opportunities to better serve customers Technology sensing capability Practical experience sharing on a regular basis Formal R&D department in the firm Formal engineering and technical studies department in our firm Significant design activity to introduce new products/services in the market 10

11. T HE DYNAMIC CAPABILITIES CONSTRUCTS INDICATORS (2) Networking Market processes (collecting information about competitors, accessing distribution channels, explore export opportunities, advertising and promotion) Technology & production (development of new products, management of production and operations, access to skilled personnel) Financial and legal support (obtaining business loans, attracting funds, support on legal issues) Participation in technology collaborations Strategic alliances R&D agreements Technical cooperation agreements Licensing agreements Research contract-out 11

12. T HE IMPACT OF SECTORAL GROUP ON THE DEVELOPMENT OF DYNAMIC CAPABILITIES Product development capability Technology sensing Market sensing Networking Participation in technology collaborations Low-tech 3.72.53.63.21.7 Medium-low 3.62.53.83.11.7 Medium-high 3.82.93.93.12.0 High-tech 3.93.03.93.22.0 Total 3.72.63.73.11.8 12

13. D YNAMIC CAPABILITIES HAVE A SIGNIFICANT IMPACT ON YOUNG FIRMS INNOVATIVE PERFORMANCE Independent variables LMT group (N=1276)HMT group (N=423) B coefficientSigB coefficientSig (Constant) -0.6350.000***-0.9070.010** Product development capability 0.2320.000***0.1750.025* Market sensing 0.0490.114 ns0.0540.439 ns Technology sensing 0.1350.000***0.3090.000*** Networking 0.0490.179 ns-0.0180.779 ns Participation in technology collaborations 0.1180.003**0.1320.033* F-team avrg edu attainment 0.0190.566 ns0.1370.010** Full-time employees 0.0010.662 ns-0.0010.675 ns * p < 0.05, ** p < 0.01, *** p < 0.001 R=0.332, R 2 =0.110 R=0.507, R 2 = 0.257 13

14. D YNAMIC CAPABILITIES HAVE A SIGNIFICANT IMPACT ON YOUNG FIRMS R&D ACTIVITY Independent variables LMT group (N=1225)HMT group (N=415) B coefficientSigB coefficientSig (Constant) -16.0970.000***-11.8880.106 ns Product development capability 2.2880.000***3.4450.035* Market sensing 1.2500.006**-0.2940.839ns Technology sensing 2.4960.000***4.0740.000*** Networking 0.0820.879 ns-5.2890.000*** Participation in technology collaborations 2.9590.000***4.7820.000*** F-team avrg edu attainment 0.5710.244 ns4.5570.000*** Full-time employees -0.0240.229 ns-0.0790.080 * p < 0.05, ** p < 0.01, *** p < 0.001 R=0.349, R 2 =0.122 R=0.477, R 2 = 0.227 14

15. D YNAMIC CAPABILITIES HAVE A POSITIVE IMPACT ON YOUNG LMT FIRMS A VERAGE TURNOVER Independent variables LMT group (N=1124)HMT group (N=396) B coefficientSigB coefficientSig (Constant) 2.3540.000***1.8540.000*** Product development capability 0.1270.019*-0.0450.622 ns Market sensing 0.2860.000***0.0970.241 ns Technology sensing 0.2250.000***0.0890.123 ns Networking -0.0350.503 ns0.0420.582 ns Participation in technology collaborations 0.0830.143 ns0.0560.442 ns F-team avrg edu attainment -0.0420.380 ns-0.0930.134 ns Full-time employees 0.0360.000***0.0280.000*** * p < 0.05, ** p < 0.01, *** p < 0.001 R=0.498, R 2 =0.248 R=0.525, R 2 = 0.275 15

16. D YNAMIC CAPABILITIES HAVE A POSITIVE IMPACT ON YOUNG FIRMS INTERNATIONAL SALES Independent variables LMT group (N=1276)HMT group (N=423) B coefficientSigB coefficientSig (Constant) -1.7500.701 ns-6.5580.541 ns Product development capability -1.5980.086 ns3.8230.108 ns Market sensing 0.4360.573 ns-3.4120.106 ns Technology sensing 1.4300.050*4.8150.001 *** Networking 1.9640.033*-2.3110.247 ns Participation in technology collaborations 3.2500.001***3.0030.112 ns F-team avrg edu attainment 1.1450.1725.0980.002 ** Full-time employees 0.1830.000***0.2140.001 *** * p < 0.05, ** p < 0.01, *** p < 0.001 R=0.231, R 2 =0.053 R=0.385, R 2 = 0.148 16

17. C ONCLUDING REMARKS DCs may exist in both LMT and HMT firms although capabilities such as technology sensing and participation in collaborative technology agreements seem to be present to a relatively smaller degree in LMT firms. DCs appear to have a significant positive impact on young firms innovative performance in both high and low-tech sectors. DCs appear to have a significant positive impact on the average turnover of firms operating in LMT sectors while the relevant effect on HMT firms appears to be insignificant. Certain DCs appear to have a significant positive impact on the international sales of LMT and HMT firms. 17

18. C ONCLUDING REMARKS Dynamic capabilities can be present in newly- established firms that in their majority are micro and small firms. Managers in young firms: should draw up a ‘dynamic capabilities portfolio’ of their firm to help them assess their actual and potential DC use in relation to their capacity for adding value to the business. better understand the role of knowledge creation and capability development in LMT sectors as a way to foster their competitiveness and strengthen their role in highly competitive international markets. 18

19. Thank you very much for your attention! protoger@chemeng.ntua.gr y.caloghirou@ntua.gr 19