Abstract/Summary

The present dissertation examines the relations between two contemporary strategy concepts––dynamic capabilities & business models––and emerging facts on firmheterogeneity, thereby directing attention to the increasing importance of firm size in performance. The macro market power literature has offered an immense service by revealing substantial increases in performance differences between firms, even within narrowly defined industries. A viable candidate explanation emphasised in the received literature is that many industries appear to have become “winner take most/all” due to globalisation and new technologies and that, therefore, a relatively small number of “superstar firms” is gaining market share across a wide range of markets. This would imply that national, niche producers are increasingly likely to lose market share to more productive, global mass producers. In chapter one, I address this issue by developing a conceptual framework that delineates how firm structure, market structure, and productivity interact, especially when there is a shift in the nature of competition toward winner take most/all. The framework suggests that business model designers may increasingly need to maximise their activity system’s sensitivity to the type of scale in which they have the greatest advantage over their competitors. In chapter two, I study empirically how changing demand and technology fundamentals shift the nature of competition toward winner take most in the financial services sector. The key insight is that the dynamic capability to seize potentially profitable opportunities attaches to the scale adjustment process, thus, revealing a connection between dynamic capability and firm scale. In the third chapter, I induct a unique dynamic capability, termed “optionality”, by which high market share firms can hedge their commanding positions against various environmental contingencies.