Knowledge-Based Dynamic Capabilities: The Road Ahead in Gaining Organizational Competitiveness

By Vaneet Kaur

This book provides a knowledge-based view to the dynamic capabilities in an organization. The author integrates two existing views on gaining competitive advantage: the Knowledge View which suggests that the capability of organizations to learn faster than competitors is the only source of competitiveness; and the Dynamic Capability View which speculates that a firm’s competitive advantage rests on dynamic capabilities which enable a firm to constantly renew the stock of ordinary organizational capabilities in accordance with the changes in the business environment. Using the IT sector in India as a case study, this book provides and tests a new framework--Knowledge-Based Dynamic Capabilities—in the prediction of competitive advantage in organizations.

• Language: English
• Publisher: Springer
• Release date: Jun 29, 2019
• ISBN: 9783030216498

Book preview

© Springer Nature Switzerland AG 2019

Vaneet KaurKnowledge-Based Dynamic CapabilitiesInnovation, Technology, and Knowledge Managementhttps://doi.org/10.1007/978-3-030-21649-8_1

1. Introduction

Vaneet Kaur¹  

(1)

The University of Texas at Dallas, Richardson, TX, USA

Vaneet Kaur

The present era of new economy has overturned the existing explanations for gaining an edge in industry and has ushered in novel means for attaining Organizational Advantage. The pivotal role of concepts like economies of scale and economies of scope in organizational transcendence are now the things of the past. Similarly, the traditional factors of production namely land, labour and capital have lost their role as the prime ratiocinates for triumph in the latter-day business environment characterized by rapid market shifts, proliferation of technologies, cut-throat competition and obsolescence of products overnight. The ingredients for organizational success in such a dynamic milieu lie in advanced notion of economies of knowing which aggrandizes the importance of knowledge as the decisive business factor in the competitive battle among corporations. Besides, even this battle between industry players has ceased to remain categorical with the dawn of the new economy. The competitive landscape has undergone a transfiguration to become knowledge-based competition and at the time of the current revamp, organizational precedence lies not merely in the possession of superior knowledge but in harnessing it to build superior knowledge-based competencies, which in turn are the hallmark of the knowledge economy.

Thus, the essence of knowledge economy is captured in the following definition:

Knowledge Economy refers to using sophisticated knowledge in all fields of human-related activities wherein critical intellectual capital is strategically combined and integrated to improve an organization’s effectiveness and efficiency (Wu and Hu 2012, p. 978).

Therefore, the present economy is based on knowledge as well as driven by it. Knowledge, here means, usable information that is relevant to a decision and that can be transformed into action. In the organizational context, knowledge therefore refers to:

The amount of expertise and information accrued throughout a firm’s history that can be used in present activities (Nieves et al. 2015, p. 2).

Organizational knowledge proffers competitive incentive to organizations as the race in today’s corporate world is confined to building better knowledge repositories and building capabilities to learn faster than competitors. Only those companies which generate or acquire new knowledge, diffuse it all through the organization and expediently transform the newly created or acquired knowledge into new technologies and products possess the potential of gaining Competitive Advantage. Competitive Advantage refers to:

The ability to hold an increasingly higher market share by offering superior products and services while enjoying a greater sales revenue and profit growth rate in comparison to competitors in the industry (Kaur and Mehta 2016a, p. 98).

However, attaining Competitive Advantage is not a plain sailing in today’s dynamic world. The afore-mentioned statement draws support from the fact that even on this day majority of scholarly pursuits in the strategic management field are primarily concerned with the fundamental question of how companies can achieve Competitive Advantage. Thus, making determination of means through which an organization can surpass competitors the ‘Holy Grail’ in the strategic management research (Helfat and Peteraf 2009).

The trail of the eagerly sought after grail of Competitive Advantage led researchers towards proposing multitude of paradigms. The early efforts in the explanation of Competitive Advantage gave rise to the Competitive Forces Approach and the Strategic Conflict Approach, both of which underscored the importance of external factors that can deter entry and make existence disadvantageous in terms of cost for the competitors. Competitiveness according to these approaches relied on exploitation of privileged positions in the market. Nevertheless, with the emergence of newer paradigms like the Resource-Based View, Knowledge-Based View and the Dynamic Capability View, the focus gradually shifted to the exploration of the role of internal factors of the firm in enhancing Organizational Competitiveness.

These approaches suggest that Organizational Competitiveness can result both from strategizing (Competitive Forces and Strategic Conflict Approach) as well as economizing (Resource-Based, Knowledge-Based and Dynamic Capability Approach). These approaches are presented in Fig. 1.1.

../images/480857_1_En_1_Chapter/480857_1_En_1_Fig1_HTML.png

Fig. 1.1

Approaches for achieving competitive advantage. (Source: Based on literature review)

Notwithstanding, economizing approaches are considered more fundamental than strategizing ones in gaining a competitive edge (Teece et al. 1997).

The first of the economizing approach i.e. Resource-Based View posits that the resources which are simultaneously Valuable, Rare, Imperfectly imitable and Non-substitutable (VRIN) are the main sources of Competitive Advantage (Barney 1991; Senaji and Nyaboga 2011). Resources are defined as:

A base upon which organizational routines, processes and capabilities can be developed" (Wójcik 2015, p. 97).

However, delving deeper into the field divulged that the possession of resources is a necessary but not sufficient condition for Competitiveness (Allred et al. 2011). Moreover, the Resource-Based View was found to be a static view (Garg and De 2012) which is insufficient for framing corporate strategy in the present dynamic environment (Barrales-molina et al. 2014).

The potential to treat Resource-Based View as a process-oriented dynamic approach (Ray et al. 2004; Wilkens et al. 2004) led to the emergence of two offshoots of the economizing approach viz. Dynamic Capability View and Knowledge-Based View.

Dynamic Capabilities View highlights twin facets of achievement of Competitive Advantage: dynamics and capability. Dynamics denote change in the environment mandating strategic responses, while Capability is defined as:

The ability of an organization to perform a coordinated set of tasks, utilizing organizational resources, for the purpose of achieving a particular end result (Helfat and Peteraf 2003, p. 999).

Collectively, Dynamic Capabilities refer to:

The firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments (Teece et al. 1997, p. 516).

The concept of Dynamic Capabilities was introduced in 1990s, however, till date there is no consensus amongst researchers on the true nature of relationship between Dynamic Capabilities and Competitive Advantage of a firm. Some scholars believe that Dynamic Capabilities are the key to Competitive Advantage (Lee et al. 2016; Li and Liu 2014; Wang et al. 2015), while others argue that Dynamic Capabilities do not manifest the characteristics of heterogeneity, thus cannot be a source of Competitive Advantage (Ogunkoya et al. 2014), and that the role of Dynamic Capabilities in achieving Competitive Advantage is limited (Zott 2003) and indirect (Nieves and Haller 2014).

Among Dynamic Capabilities, Adaptive, Innovative and Absorptive Capabilities are stated to be the most important Higher-Order Capabilities of Dynamism (Wang and Ahmed 2007). Higher-Order Capabilities are defined as:

A Higher Order construct comprising of three Dynamic Capabilities namely Adaptive Capability, Absorptive Capability and Innovative Capability. (Kaur and Mehta 2016a, p. 98).

The classification of Higher-Order Capabilities is given in Fig. 1.2.

../images/480857_1_En_1_Chapter/480857_1_En_1_Fig2_HTML.png

Fig. 1.2

Classification of higher-order dynamic capabilities. (Source: Based on literature review)

For the purpose of the present study, the definitions of individual Higher-order Capabilities as given in Kaur and Mehta (2016a, p. 98) are as below:

Adaptive Capability refers to the ability to monitor changes in the market and to come at par with techniques and skills of other companies.

Absorptive Capability refers to the ability to collect and comprehend new knowledge gained through business collaborations and enhance working skills with the use of such knowledge.

Innovative Capability refers to the ability to acquire new skills/equipment to improve the service process and provide clients with products and services that offer unique benefits superior to those of competitors.

Meanwhile, Knowledge-Based View emerged as a predominant paradigm to study Firm Competitiveness. The view propounds that differences in the performances of firms exist due to differences in the stock of knowledge possessed by each firm as well as firm’s individual capabilities in developing and utilising this stock of knowledge. The proponents of the view suggest that firm capabilities are developed with the help of Knowledge Processes and the ability of firms to learn faster than rivals is reckoned to be a prime source of Competitiveness. Such capabilities are the First-Order Dynamic Capabilities and are referred to as Knowledge Management Process Capabilities which are defined as:

Knowledge Processes as First-Order Dynamic Capabilities which are comprised of Knowledge Acquisition Capabilities, Knowledge Combination Capabilities and Knowledge Protection Capabilities (Kaur and Mehta 2016a).

The classification of Knowledge Management Process Capabilities is given in Fig. 1.3.

../images/480857_1_En_1_Chapter/480857_1_En_1_Fig3_HTML.png

Fig. 1.3

Classification of knowledge process capabilities. (Source: Based on literature review)

The individual Knowledge Management Process Capabilities are defined as below:

Knowledge Acquisition Capability encompasses collection of knowledge from varied sources and represents flow of knowledge from external sources into the stocks of a company (Gold et al. 2001; Nguyen and Neck 2008; Nielsen 2006).

Knowledge Combination Capability is the firm’s ability to integrate and apply internal and external knowledge. (Zheng et al. 2011, p. 1039).

Knowledge Protection Capability deals with "the protection of knowledge within an organisation from illegal or inappropriate use or theft (Gold et al. 2001, p. 192).

While the two parallel lines of thought namely Dynamic Capability View and Knowledge Based View have primarily been treated as distinct and applied in isolation in the quest for the holy grail, nonetheless, the views can additionally be capitalized on by effectuating them in a complementary manner that can further increase the chances of gaining an edge over competitors. Very minimal efforts have been made in this direction which however remain vague and tautological with some authors calling Knowledge Management Process Capabilities or meta-level Dynamic Capabilities in themselves as Knowledge-Based Dynamic Capabilities.

Ideally, Knowledge Management Process Capabilities can be integrated with Higher-Order Dynamic Capabilities to truly form the Knowledge-Based Dynamic Capabilities.

Knowledge-Based Dynamic Capabilities can be defined as the abilities of an organization to acquire, combine and protect knowledge resources in order to address changes in the business environment through building Higher-Order Dynamic Capabilities (Zheng et al. 2011).

The advanced paradigm of Knowledge-Based Dynamic Capabilities can serve as an edifice to the existing strategic management literature, especially in light of the knowledge-economy wherein knowledge can be gainfully leveraged to form superior capabilities of dynamism. The true nature of these resultant Knowledge-Based Dynamic Capabilities and the role that such capabilities play in achieving Competitive Advantage remains unidentified in the existing literature and is a major gap in the present body of knowledge.

1.1 Statement of Problem

In the above context, a relationship between Knowledge-Based Dynamic Capabilities as predictors of Competitive Advantage of organizations needs to be established. The previous research has shown that Knowledge Management along with the related processes and capabilities have an impact on Competitive Advantage and so have the meta-level Dynamic Capabilities. Nevertheless, both the concepts have not been fused into a single framework categorizing such capabilities as hierarchies of Dynamic Capabilities and nor is their collective effect on Competitive Advantage been studied till date. The present book has tried to address this gap in the existing literature. The research question therefore is to investigate whether Knowledge-Based Dynamic Capabilities aggrandize prediction of Competitive Advantage of organizations. In order to test the afore-mentioned relationship, the effect of Knowledge Management Process Capabilities and Dynamic Capabilities on Competitive Advantage is studied in tandem with each other, thereby giving a novel Knowledge Based View to the Capabilities of organizations.

1.2 Objectives of Study

The broad objective of the study is to help organizations in achieving Competitive Advantage by focussing on the specific role of Knowledge-Based Dynamic Capabilities in achieving Competitive Advantage for Multinational Companies (MNCs). The study aims to integrate two separate views of Dynamic Capabilities and Knowledge Based Approach into a common paradigm such that the resultant superior capabilities can possess more power to predict Competitive Advantage.

The main objectives of the study are as under:

i.

To study the role of Process Capabilities in the organizations under study, in terms of Knowledge Processes related to Acquisition, Combination and Protection of Knowledge Resources.

ii.

To study the Knowledge-Based View of Dynamic Capabilities by analyzing the relationship between the Knowledge-Based Processes and Dynamic Capabilities of the organization viz. Adaptability, Absorptiveness and Innovativeness.

iii.

To study the role of Knowledge-Based Dynamic Capabilities in enhancing the Competitiveness of an organization.

iv.

To study and evaluate Competitive Advantage as perceived by the respondents of the organizations under study.

v.

To suggest strategies for enhancing the Knowledge Orientation, and thus the Competitiveness of the organization.

1.3 Rationale of Study

The rationale/justification for the study has been discussed in terms of: (i) Rationale for the selection of topic; (ii) Selection of MNC’s as a sample unit for analysis; (iii) Selection of Indian IT Sector as a scope, as has been discussed below:

1.3.1 Rationale for Selection of Topic

The existing strategic management literature does not explicitly address Competitiveness related issues of multinational firms (Teece 2014), especially in IT sector, which makes it extremely important to fulfil the objectives of the present study. Moreover, the focus of majority of studies has been on explanation of factors contributing to sustainability of Competitive Advantage thereby ignoring how Competitive Advantages can actually be gained at the first place (Andersén 2012).

All the major variables of the present study also warrant further investigation. For instance, the domain of Knowledge Management Process Capabilities in general and the mechanism through which Knowledge Management practices yield Competitiveness in particular have been termed as vague and understudied areas in strategic management research (Shahzad et al. 2016). Furthermore, literature has still not adequately addressed the specific impact of each Knowledge Management Process independently on Competitiveness of a firm (Hegazy and Ghorab 2014). This lacuna in research has translated into lack of proper understanding on the part of managers with regards to the ways in which knowledge, as a resource, can be leveraged (Foss and Pedersen 2004; Kaur and Mehta 2016b). The specific gap in literature when addressed through the present study can lead to better comprehension of component parts and processes of knowledge which can thereby facilitate management of corporations in gaining Competitive Advantages.

Similarly, research in the field of Dynamic capabilities is still at a nascent stage (Castiaux 2012; Teece 2012; Wójcik 2015). As a result, there exists various problems that are limiting the potential contribution of the Dynamic Capability Approach such as lack of a cogent theoretical foundation, little empirical support, unclear value-added vis-à-vis existing concepts, unclear practical implications, irregularities and contradictions, etc. (Breznik and Lahovnik 2014; Garg and De 2012; Ljungquist 2014; Michailova and Zhan 2014; Zhan and Chen 2013). There is no consensus among researchers regarding the role of Dynamic Capabilities in achieving Competitive Advantage by firms (Chaharmahali and Siadat 2010) which presses upon the need for such empirical research to establish the correct nature of this role. Also, research in the field of Dynamic Capabilities has remained confined at an aggregate level, thus neglecting the micro-foundations of development of such capabilities (Arndt 2011). The focus of research has been on the content properties of Dynamic Capabilities (Arndt 2011), thereby ignoring the process aspects which has led to difficulties in understanding how Dynamic Capabilities actually evolve over time. Moreover, there is a need for research on various levels of Dynamic Capabilities to provide deeper understanding of the concept (Ambrosini et al. 2009). Researchers argue that if a theoretical and empirical foundation for the Dynamic Capability View is not is not developed soon, the focus of strategic management may soon shift away from the promising concept (Arend and Bromiley 2009; Breznik and Lahovnik 2014).

In addition, literature suggests that classic views of strategic management as well as their variations are outmoded in the present era of new economy (Wójcik 2015). Thus, there is a need to come up with novel paradigms that can better explain Competitive Advantage in the current context. Moving in that direction, researchers have proposed integration of Dynamic Capabilities Approach with the Knowledge-Based View of the firm as future area of research in strategic as well as knowledge management (Hong et al. 2008). The present body of literature hints at some association between Knowledge Processes and Dynamic Capabilities (Kaur and Mehta 2016b), however, the exact nature of association is unknown, as knowledge base can serve both as a foundation to build Higher-Order Capabilities, as well as the reason for rigidity (Lee et al. 2016; Nieves and Haller 2014; Prieto and Easterby-Smith 2006). In depth examination of these variables in the present study has facilitated in providing deeper comprehension about the true nature of relationships between the two constructs. Additionally, the potential to study the role of Dynamic Capabilities as a mediating variable between Knowledge Management Process Capabilities and achievement of Competitive Advantage (Cepeda and Vera 2007; Prieto and Easterby-Smith 2006) remains untapped till date. Moreover, as a rich theory of multinational corporations must entail an amalgamation of concepts of resources and capabilities for providing valuable inputs in order to gain a strategic edge over competitors (Teece 2014), this research sets out to integrate the knowledge resources and processes with the Dynamic Capabilities of a firm. The present study works in the said direction so as to take research in the field of strategic management one step ahead (Kaur and Mehta 2016b; Nielsen 2006). The resultant superior Knowledge-Based Dynamic Capabilities can become the reason for lasting advantage for MNCs.

1.3.2 Rationale for Selection of MNCs as Units of Analysis

A Multinational Company (MNC) is an organization that designs strategy and runs operations in more than one country for generating income (Teece 2014). Knowledge-Based Dynamic Capabilities are particularly applicable to MNCs as the environment that such companies face in characterized by complexity, uncertainty, fierce global competition and rapid technological change. The future of MNCs is based upon such Knowledge-Based Capabilities of Dynamism, owing to the support that such capabilities lend to gain Competitive Advantage in rapidly-changing knowledge economies. As managers of MNCs have to constantly make strategic decisions about renewing organizational capabilities in accordance with the changes in the business environment, Knowledge-Based Dynamic Capabilities have the potential to serve as a cornerstone for managers in their pursuit of Competitive Advantage. Such capabilities are more important for multinational companies than those for a firm with purely a domestic focus, which made MNCs conceptually engrossing and exacting units of analysis for the purpose of the present study.

1.3.3 Rationale for Selection of Indian IT Sector as Scope

Emerging economies, like India, are gaining an increasingly dominant position in the world and as such India provides both a laboratory as well as a challenge for investigating the relationship between Organizational Capabilities and Competitiveness (Huan and Li 2015). However, current studies in the field are primarily based upon the organizations in developed countries and very little is known about organizations operating in the developing countries especially India (Huan and Li 2015). Thus, India provides a rich setting for examining the nature of Knowledge-Based Dynamic Capabilities as well as for testing the relationship of the construct with Organizational Competitiveness. Moreover, India displays numerous common characteristics with other developing countries (Huan and Li 2015), therefore, the findings of the present study have useful implications for organizations operating in a similar context.

Organizational capabilities are context-specific or sector-specific, thus, any research in the domain calls for sector-specific studies (Ethiraj et al. 2005; Ludwig and Pemberton 2011). The gap between abstract theoretical knowledge on organizational capabilities and the practical relevance for practitioners can be bridged with the help of such focussed studies (Ludwig and Pemberton 2011). Moreover, choice of a single sector ensures that business processes are more or less homogenous and thereby helps in securing a higher level of internal and statistical conclusive validity. Thus, a single sector has been selected for the purpose of the present study. The rationale for choosing Information Technology (IT) sector is presented in the following paragraphs.

The global IT industry offers immense opportunities for industry players. Global Outsourcing sites like India, Vietnam, China and the Philippines are pivotal to the global industry (Lucintel 2012) but the phenomenal growth and development showcased by IT sector in India has specifically caught the eye of the world markets (Paramati et al. 2016; Shriastava and Pathak 2016) and has brought nation at the centre stage of the world economy (Bhalerao and Kumar 2016).

While the global technology spend remained constant in 2015, India continued to gain market share, thereby emerging as the major IT hub of the world (NASSCOM Indian IT-BPM Industry Report 2016). Growing at a CAGR of over 15% over the last decade (Bhatt and Bhattacharya 2015; Bhoola 2015), the sector has made unparalleled contribution towards Indian economy in terms of highest relative share in national GDP of around 9.3% (NASSCOM Indian IT-BPM Industry Report 2016). IT sector has earned revenue of USD 143 billion in the previous year and is racing ahead as one of the fastest growing sector in the country as well as the world (NASSCOM Indian IT-BPM Industry Report 2016). The sector is expected to continue to lead in the Asia-Pacific region with a CAGR of 18.6% (Kimmatkar and Sattar 2016).

Moreover, the sector single-handedly contributes a significant 45% to total services exports volume of the country (NASSCOM Indian IT-BPM Industry Report 2016). Exports account for 77% of the total revenue of the sector (Paramati et al. 2016). Presently, Indian IT exports exceed USD 100 billion, the value of which has doubled in a short span of 6 years (NASSCOM Indian IT-BPM Industry Report 2016). The sector has recorded largest growth in the exports arena and has added USD 50 billion in the country’s foreign reserves in the last 5 years (NASSCOM Indian IT-BPM Industry Report 2016). The sector has also been a leading beneficiary of FDI in the country with an inflow of around USD 7 billion (NASSCOM Indian IT-BPM Industry Report 2016).

Furthermore, IT industry is the largest employment generator in the private sector as it provides direct employment opportunities to 3.7 million people and indirect employment opportunities to around ten million people (NASSCOM Indian IT-BPM Industry Report 2016). The numbers include 1.1 million jobs which were added in previous 5 years (NASSCOM Indian IT-BPM Industry Report 2016). The sector possesses a global talent powerhouse comprising of more than one million technical graduates and around 36–38% share of global employable talent pool fit for IT (NASSCOM Indian IT-BPM Industry Report 2016).

IT sector in India has various strengths, weaknesses, opportunities and threats. Low-cost skilled labour is one of the cornerstones for Competitive Advantage of the Indian IT industry. The wage difference when compared to western countries is as high as 70–80% for comparable work (Kumar and Jha 2013). On the other hand, in terms of domestic inter-industry comparison, wages in the IT industry are much higher than in other sectors, thereby ensuring a constant supply of man-force to the sector (Bhattacharjee and Chakrabarti 2015b). Thus, India’s specialization in IT is a result of amalgamation of absolute as well as comparative wage advantages (Bhattacharjee and Chakrabarti 2015b). With superior skill sets, quality education, disciplined approach, exposure to latest technologies and fine design as well as project management skills, Indian workforce already possesses the most desirable characteristics for IT industry. To compliment this, India has the second largest English speaking population in the world coupled with the second highest number of engineering graduates worldwide (Bhattacharjee and Chakrabarti 2015b). IT industry by its nature has more applicability of the factor endowments in which India has a comparative advantage, such as quality manpower, and less utility of resources in which the country has a comparative disadvantage, such as financial capital and physical infrastructure (Bhattacharjee and Chakrabarti 2015b). In addition, Indian time zone provides strategic benefit of lower response time and round-the-clock service due to huge time differences. Whereas, increasing attrition rate among IT workers as well as the tendency of workers to pursue IT as a mere part-time career is surfacing as the weakness of the sector. Higher infrastructural costs serve as additional bottleneck for the sector. Meanwhile, changing image of the country as a quality IT destination instead of a low-cost one is emerging as an opportunity that can help India gain more foreign investment. On the other hand, the threats looming on the sector include growing outcry against outsourcing in western countries and the emergence of alternative cost competitive IT destinations such as China, Philippines and South Africa (Kumar and Jha 2013).

Nevertheless, IT sector has made astounding contributions towards country’s presence in the global landscape with regards to qualified human resources, cost competitiveness and availability of efficient telecommunications infrastructure, thereby pointing towards the vast potentiality of the industry in the global arena (Kaur and Mehta 2016b; Kimmatkar and Sattar 2016). The sector has emerged as the prime catalyst of economic growth in India (Agariya and Yayi 2015) and the key competencies developed by the sector have placed nation on the international canvas, thus, transfiguring image of the country to that of a worldwide player in providing world class technology solutions (Kaur and Mehta 2016b; Sudarvel and Velmurugan 2015). IT sector is comparatively much ahead of the learning curve with firms delivering excellence in each field. Such factors have facilitated country’s emergence as the leading and most favoured sourcing destination with 56% share in global sourcing pie (Bhattacharjee and Chakrabarti 2015a; NASSCOM Indian IT-BPM Industry Report 2016; Soni 2013). The economic worth of this sector is estimated to reach USD 350 billion by the year 2025 (NASSCOM Indian IT-BPM Industry Report 2016) and the phenomenal role played by the sector in Indian economy (Paramati et al. 2016) has helped the country to transmute from an agriculture-based economy to a knowledge-based economy (Sudarvel and Velmurugan 2015). The success story of the sector does not end here, rather the sector is likely to maintain its technological precedence and continue the pace of double digit growth in the coming years (Bhattacharjee and Chakrabarti 2015b).

However, the current paradigms fall short of vividly explaining the growth of IT sector in India (Soni 2013). On the other hand, Knowledge-Based Dynamic Capabilities View is apropos in studying the rise as well as growth prospects of IT sector in India (Kaur and Mehta 2016b).

Withal, the industry includes more than 16,000 firms out of which around 4200 are tech start ups and one thousand are multinational companies (NASSCOM Indian IT-BPM Industry Report 2016). The pyramidal structure encourages a unique but a fierce competition (Bhattacharjee and Chakrabarti 2015b). The large players offer bundled solutions covering the entire value-chain while the small players and start ups excel in niche services so as to outmanoeuvre big industry players. Thus the wide spectrum of services offered by the industry catering to the entire value chain, makes the industry internationally competitive (Bhattacharjee and Chakrabarti 2015b). In order to retain this global competitiveness, industry is employing various measures to move higher-up the value chain such as adaptive delivery models, establishment of delivery centres in tier-2 and tier-3 cities in addition to tier-1 cities, automation of business processes, providing excellence in delivery, exercising domain expertise, offering high-end services like IT consulting as well as introducing innovative processes (Bhattacharjee and Chakrabarti 2015b).

Indian IT sector undoubtedly has carved its niche in the global landscape as far as the Competitiveness of the sector is concerned. But how this Competitiveness is gained at a firm level still remains a fundamental question in the field of strategic management (Arndt 2011), which the present research seeks to address.

Furthermore, IT sector is considered as one of the most dynamic and demanding sectors today (Breznik and Lahovnik 2016). IT firms are said to have a direct or an indirect impact on firms belonging to other industries as the inherent nature of IT firms makes way for greater integration into the environment of other industries (Breznik and Lahovnik 2014). Thus, IT sector is an ideal context to test and validate the below mentioned research hypotheses.

1.4 Hypotheses

In order to achieve the research objectives, a number of hypotheses have been formulated based on the extant literature review undertaken.

To understand the effect of the key dimensions of the Knowledge Management Process Capabilities on firm’s Competitive Advantage, the literature on Knowledge Management has been reviewed and the three key components of Knowledge Management Process Capabilities are proposed, namely Knowledge Acquisition Processes, Knowledge Combination Processes, and Knowledge Protection Processes. Further, to explore the relationship of such Knowledge Process Capabilities with Competitive Advantage, the following hypothesis is proposed:

H1: Knowledge Process Capabilities have a significant impact on firm’s Competitive Advantage.

To understand the impact of Knowledge Processes Capabilities on the Higher-Order Dynamic Capabilities of a firm, the literature on Dynamic Capabilities has been delved into and three Higher-Order Dynamic Capabilities have been identified viz. Adaptive Capability, Absorptive Capability and Innovative Capability. The study aims to explore the relationship of these Higher-Order Capabilities with the First-Order Knowledge Process Capabilities, identified in first phase. Based on the insights from the literature, the following Hypothesis is suggested:

H2: There is a significant relationship between Knowledge Processes Capabilities and Higher-Order Dynamic Capabilities of the organization i.e. Adaptive Capability, Absorptive Capability and Innovative Capability.

Finally, with a view of investigating the mediating role, Knowledge-Based View has been blended with the Dynamic Capability View and accordingly attempts have been made to analyze the collective as well as hierarchical effect of Knowledge Process Capabilities and Higher-Order Dynamic Capabilities on Competitive Advantage. Thus, the third Hypothesis has been formulated as follows:

H3: Higher-Order Dynamic Capabilities play a mediating role between Knowledge Process Capabilities and Competitive Advantage of a firm.

1.5 Research Design

In seeking to test the above interrelationships, the present research is designed to provide a comprehensive picture of description of components of Knowledge Management Process Capabilities, Higher-Order Dynamic Capabilities and Competitive Advantage. In addition, the study aims to explain how two separate views of Dynamic Capabilities and Knowledge Based Approach can be merged into a common paradigm. Thus, a mixture of descriptive and causal research is employed in the study.

The study adopts a quantitative paradigm and utilizes a deductive approach to empirically test the relationships among the identified variables. A three-step approach has been followed in the research design process for the present study. The first step includes questionnaire design, the second step marks the pilot survey and the final step includes the main survey.

The subjects of this cross-sectional study include employees working at various organizational levels in the Indian offices of select IT multinational companies. Further, stratified random sampling has been used as the technique for sampling.

The hypotheses used to examine the relationships have been formulated based on the findings of the existing relevant literature. Survey method has been chosen to test the hypotheses for two main reasons. First, survey provides an expeditious and accurate way of assessing information about a population (Nguyen 2010). Second, a review of existing empirical studies in the field shows that survey is the most popular method to measure these particular concepts in the strategic management literature.

1.6 Scope

The ambit of the study includes four Information Technology multinational companies operating in India, out of which two companies are Indian multinationals whereas the other two are foreign multinational companies operating in India.

The selection of four organizations has been based on four indicators:

1.

the organization must be a multinational corporation;

2.

the organization must be a recognized player in the industry;

3.

the business orientation as well as the products and services of the organizations must be comparable; and

4.

the organization has to be willing to participate in the study.

Moreover, four organizations have been selected for the study as the number is considered to be the ideal number of cases for the purpose of any study (Breznik and Lahovnik 2014).

The subjects of the study include employees working at various managerial/technical levels in the Indian offices of following four IT multinational companies:

Accenture PLC

Accenture PLC is a multinational corporation and its country of origin is Ireland. It provides consulting, technology and outsourcing services to its client base in one hundred and twenty countries (Accenture 2014) which includes eighty nine companies out of the prestigious Fortune top one hundred companies of the world (Accenture 2015). The company also holds a leader status in the cloud professional services worldwide (Accenture 2015; Cloudwedge 2014). Accenture is acknowledged for being a leading learning organization in a study conducted by Teleos. The company even holds a distinguished honour of being Global Most Admired Knowledge Enterprise (MAKE) Award Winner for nineteen times (Global MAKE Report 2016).

Cognizant Technology Solutions

Cognizant Technology Solutions is a multinational company which has its headquarters in New Jersey. It provides IT services as well as consulting and BPO services to its clientele worldwide. In 2011, the Fortune magazine declared it to be the world’s third most admired IT service company (Cognizant 2015; Fortune 2011). The company has made its presence felt globally through its superior performance and world class services.

Infosys Ltd

Infosys Ltd is an Indian multinational company that provides various services like business consulting, information technology services and outsourcing services. It is the second-largest Indian based Information Technology services company (Gartner 2013) having a global presence. The Wall Street Journal Asia declared Infosys as India’s most admired company (Infosys 2015) and the HFS Research in its 2013 ranking announced it as the 15th largest IT services provider in the world (Infosys 2015; Phadnis 2014). The company is also recognized for maximizing its enterprise intellectual capital by Teleos. Infosys is the premier Indian corporation to win the Global MAKE Award and the company has won the prestigious award for twelve times (Global MAKE Report 2016).

Wipro Ltd

Wipro Ltd is an IT multinational company