Dynamic capabilities and the emergence of intraindustry differential firm performance: insights from a simulation study

Abstract This paper explores how the dynamic capabilities of firms may be linked to differential firm performance within an industry. A formal model is presented in which dynamic capabilities are treated as a set of routines guiding the evolution of a firm's resource configuration. The model centers on the endogenous choice firms make between resource deployment through imitation and experimentation in order to generate alternative resource configurations. Three performance‐relevant attributes of dynamic capabilities are proposed: timing, cost, and learning of resource deployment. Theoretical propositions are developed that suggest how these attributes contribute to the emergence of differential intraindustry…