Strategic Management of Firms Operating in High-Velocity Markets


Note:

this is a long paper written for academic purposes. It may take some time to read it in its entirety

1.Idea in Brief

The paper is intended to address the strategic management of firms operating in high velocity markets and in particular the inter-dependencies and trade-offs between ordinary (static) capabilities, causal ambiguity and dynamic capabilities.

Throughout the paper we adopt the resource-based view (RBV) with regard to the link between inimitability and the creation of competitive advantage and Schumpeter’s view of competition as a destructive process in which effort, assets, and fortunes are continuously destroyed by innovation (creative destruction); this view comes in conflict with the neoclassical model of competitive markets which is more suitable to static and monopoly-based markets, hence not the object of this work.

Our work combines some practical perspectives with the theoretical work and should be viewed as an extension of RBV (Penrose, Andrew, Rumelt) and dynamic capabilities (Teece, Pisano) frameworks widely published and taught in academia.

2.Definitions

High-velocity markets

We define high-velocity markets as the locus for a number of sectors that show common similarities, market and capability-wise, in which the cost of information is relatively low while the flow (speed) of information relatively high. This covers all major industries from manufacturing, energy and resources to biotechnology, engineering and pharmaceuticals. An important distinction between static and hi-velocity industries is also the fact that innovations that take place in the far ecosystem arena (“far away” from the firm) can be brought into the firm and its industry with relative ease.

In this sense, the firm operates usually in its “habitable zone” but often the disruption takes place from the periphery inwardly.