Dynamic capabilities are increasingly being used to explain how firms leverage their resource base over varying levels of market dynamism. Yet little attention is given to how the internal dynamism of the firm might affect capability development. Firms are often faced with the challenge of establishing ways to engage in goal directed action that calls upon routinized, path dependent activity as well as the exploration of new opportunities, at times when there is inner turbulence. Using an in-depth case study (2007 to 2012) on the airline Spanair, we ask the following question: How can a firm leverage its dynamic capabilities to bring about deep purposeful change? In our findings we identify a circular rather than hierarchical capability pattern with four dynamic capabilities, adding, transferring, integrating and shedding, and two higher order capabilities, goal development and orchestration. We contribute to the literature by demonstrating, how a link between the goal development capability of senior directors and the change orchestration capability, create a goal directed path. We also explain how the link between the high order and dynamic capabilities develops an important bridge between path dependence and path creation. We then demonstrate how goal adjustment occurs in a circular manner to create a link between the four dynamic capabilities and the goal development capability. Furthermore, we demonstrate how the goal development and change orchestration capabilities jointly enable a firm’s transformation, particularly in times of heightened internal and external environmental turbulence.

Peer Reviewed