A meta-analysis found dynamic capabilities positively related to performance, though the link was no stronger in industries with faster technological change.
Why it matters when the plan changes
Choosing a new direction and building the ability to pursue it are different acts. David Teece, Gary Pisano and Amy Shuen defined dynamic capabilities in 1997 as a firm's ability to integrate, build and reconfigure competences to match the requirements of a changing environment. The idea explains why two companies with the same strategy can execute it very differently: they differ in how readily they can rebuild their routines.
The tension is between history and change. Capabilities are built through past choices, and path dependence means those choices constrain what can be built next. A 2016 meta-analysis by Stav Fainshmidt and colleagues found dynamic capabilities positively related to performance, with a corrected correlation of 0.296, but the link was not stronger in more dynamic industries, suggesting moderators that are not yet well understood. History shapes what a firm can become next.
In practice
Two regional banks adopt the same digital strategy. One has a record of reorganising around new products and retiring old ones; the other has run the same branch model for decades. The first reassigns teams and decision rights within a year. The second launches the same products on top of unchanged routines, and adoption stalls.
Evidence
In 1997 Teece, Pisano and Shuen defined dynamic capabilities as the ability to integrate, build and reconfigure competences to match the requirements of a changing environment.
Dynamic capabilities, Wikipedia (2026)A meta-analysis found dynamic capabilities positively related to performance (corrected correlation 0.296), but not more strongly in industries with higher technological dynamism.
Stav Fainshmidt, Amir Pezeshkan, M. Lance Frazier, Anil Nair and Edward Markowski, Dynamic Capabilities and Organizational Performance, Journal of Management Studies (2016)Path dependence is the phenomenon of past events or decisions constraining or defining later events or decisions.
Path dependence, Wikipedia (2026)
What it cannot tell you
Dynamic capabilities are hard to observe directly and are often inferred from the changes they are meant to explain, which makes the concept easy to apply after the fact. Evidence links them to performance on average; it does not show which capability a particular firm needs for a particular strategy.
Questions
David Teece, Gary Pisano and Amy Shuen, in a 1997 paper titled Dynamic Capabilities and Strategic Management. They defined the firm's ability to integrate, build and reconfigure internal and external competences to address a changing environment, extending the resource-based view of the firm.
Ordinary capabilities let a firm do its current work well: produce, sell, deliver. Dynamic capabilities let it change that work: sense new opportunities, reallocate resources and redesign routines. A firm can be excellent at the first and poor at the second, which is often when a strategy change stalls.
Yes, on average. Stav Fainshmidt and colleagues' 2016 meta-analysis found dynamic capabilities positively related to organisational performance, with a corrected correlation of 0.296. Contrary to the theory, the relationship was not stronger in industries with higher technological dynamism, suggesting moderators that are not yet understood.
The idea that past events or decisions constrain later ones. For capabilities, it means a firm's options depend on what it has built before: routines, relationships and skills that took years to develop cannot be swapped overnight, which is why a strategy can be chosen much faster than it can be resourced.
By looking at its record of change rather than its statements about agility: how often it has reallocated resources, retired products or redesigned roles, and how well those changes landed. The evidence is historical, which is also its limit, since past adaptation does not guarantee the next one.