Building micro-foundations for the routines, capabilities, and performance links

• Published in: Managerial and decision economics Vol. 29; no. 6; pp. 489 - 502
• Main Authors: Abell, Peter, Felin, Teppo, Foss, Nicolai
• Format: Journal Article
• Language: English
• Published: Chichester, UK John Wiley & Sons, Ltd 01-09-2008; John Wiley and Sons; Wiley Periodicals Inc
• Series: Managerial and Decision Economics
• Subjects: Conceptualization; Corporate strategies; Economic behaviour; Economic externalities; Economic performance; Economic psychology; Economic theory; Evolution; Firm theory; Management; Management principles; Organizational behavior; Organizational behaviour; Prisoners dilemma; Production functions; Productivity; Social sciences; Strategic management; Studies
• ISSN: 0143-6570; 1099-1468
• DOI: 10.1002/mde.1413

Micro-foundations have become an important emerging theme in strategic management. This paper addresses micro-foundations in two related ways. First, we argue that the kind of macro (or 'collectivist') explanation that is presently utilized in the capabilities view in strategic management-which implies a neglect of micro-foundations-is incomplete. There are no mechanisms that work solely on the macro-level, directly connecting routines and capabilities to firm-level outcomes. While routines and capabilities are useful shorthand for complicated patterns of individual action and interaction, ultimately they are best understood at the micro-level. Second, we provide a formal model that shows precisely why macro-explanation is incomplete and which exemplifies how explicit micro-foundations may be built for notions of routines and capabilities and how these impact firm performance.