Internationales Institut für Management (IIM)

SEMINAR “STRATEGIC AND TECHNOLOGICAL CAPABILITIES”

The concept of routines:

Main assumptions

by
ISIDRO URQUIOLA RALERO

28 January 2008
CONTENTS
1 INTRODUCTION..........................................................................................................3
2 ORIGIN OF THE CONCEPT OF ROUTINE ...............................................................4
2.1 THEORY OF THE ECONOMIC EVOLUTION................................................... 4
2.1.1 SCHUMPETER THEORY.............................................................................. 5
2.1.2 BIOLOGIST THEORY................................................................................... 5
2.1.3 BEHAVIORALISM THEORY....................................................................... 6
3 CONCEPT OF ROUTINE AS CORE ...........................................................................7
3.1 THE ORGANIZATION CONSISTS OF ROUTINES .......................................... 7
3.1.1 COORDINATION AND CONTROL............................................................. 9
3.1.2 TRUCE .......................................................................................................... 10
3.1.3 ECONOMIZING ON CONGNITIVE RESOURCES .................................. 10
3.1.4 REDUCING UNCERTAINTY ..................................................................... 10
3.1.5 STABILITY .................................................................................................. 11
3.1.5 STORING KNOWLEDGE ........................................................................... 11
4 CHARACTERISTICS OF ROUTINES.......................................................................12
4.1 PATTERNS .......................................................................................................... 12
4.2 RECURRENCE.................................................................................................... 12
4.3 COLLECTIVE NATURE .................................................................................... 13
4.4 MINDLESSNESS vs. EFFORTFUL ACCOMPLISHMENT ............................. 13
4.5 PROCESSUAL NATURE ................................................................................... 13
4.6 CONTEXT-DEPENDENCE, EMBEDDEDNESS AND SPECIFICITY............ 13
4.7 PATH DEPENDENCE ........................................................................................ 14
4.8 TRIGGERS........................................................................................................... 14
5 INNOVATIONS AND ROUTINES ............................................................................16
6 PATH DEPENDENCIES.............................................................................................18
7 DYNAMIC CAPABILITIES .......................................................................................20
8 CONCLUSION ............................................................................................................22
9 REFERENCES .............................................................................................................23
 1 INTRODUCTION
The proposal of this work is the description of the evolutionary theory developed
mainly by the authors Nelson and Winter in the year 1982. This theory treats about the
capacities and the behaviour of the firms upon operating in an environment of market,
and serves us to analyze a good number of phenomena associated with economic
changes that come whether for changes in the demand of the product or by the
conditions of the factors of the offering. It is handled also the positive implications that
this evolutionary theory has in practice.
Taking the Routine as main actor in this work, first I will try to focus about the origin
of the concept of routine and through the investigation carried out, to compose and to
explain the different visions that the authors have with the concept of routine since the
point of view of the economic evolutionary theory. The different authors or more
specific, the currents where the authors Nelson and Winter were inspired and they
supported their work to build their theory are mentioned, as well as the characteristics
were each one contributed in the work. In this way we will give us account how is that
these routines became a so important factor to take in consideration to the evolution and
understanding of the modern business, and that we should take into account when we
analyze our own businesses.
Thus it is like the work continues, taking the point of view from a firm and how is
this new theory reflected. The great aid that provides us to think about this new vision
from the perspective of the routines that happen to ours around when we are working,
the capacity that have we in influencing our work if only we put more attention to the
daily activities that we develop.
Other of the main points that I want to touch in the work is to describe the
characteristics of the Routine, since many authors through the years tried to describe
and to energize the concept and the investigation of what is the Routine, describing it
with the different perspectives of the authors, maybe so we will begin to leave behind
the ambiguities and weaknesses that surround it, and therefore, that the literature about
this theme increases more and more in other concepts or other points of view. An
outline of the characteristics of the word Routine applied in the business, being focused
to describe the theory of the economic evolution (Nelson and Winter, 1982), is exposed
under the number four inside the work.
The capacity to innovate, to develop new products, is a characteristic very
appreciated by the new businesses that seek an opportunity in the market, for example
the work that does the business Apple Computers (that is famous for their innovations
in the market for their products, citating mainly the personal computers and the iPod),
this has generated that the Innovations be all a new range of objectives inside the
strategies of the businesses. How it is that these innovations go of the hand of the
concept (handled here) of Routine? It will be the question to itemize in the part five.
The responsible components of an inherent, administrative dilemma of the identified
stiff capacities in a business will be in the point number six. As well as a solution to
these problems in the number seven, explained from the point of view of the "Dynamic
Capabilities" and that a business should take in consideration to include them inside its
nucleus of forces.
 2 ORIGIN OF THE CONCEPT OF ROUTINE

2.1 THEORY OF THE ECONOMIC EVOLUTION

The basic concept that I am going to describe in this work is the Routine, as the main
characteristic of the evolutionary theory. Luigi Marengo (1996) in its book Industrial
and Corporate Change, does a comment that I would like to include here to begin the
first paragraph of this chapter. The routines or rule-guided behaviour, seems a
“foundational concept for an alternative theory of decision making to the neoclassical
one”. Keeping in mind that this theory is based or intends to improve the existents, good
point seems to me to mention the characteristics in which it differentiates itself of the
passed theories.
In the classical theory, the businesses are treaties understanding that its motivation is
centered in the profit and compromised in seeking new methods to improve these
profits. The actions hill of the businesses, from an evolutionary economic point of
view, not be assumed to be profit maximizing over well-defined and exogenously given
choice sets. Nelson and Winter (1982:4) explain, “firms are modelled having certain
capabilities and decision rules that are modified as a result of both deliberate problem-
solving efforts and random events”.
“Decision rules” as very close conceptual relatives of production “techniques”. The
term for all regular and predictable behavioural patterns of firms is “routine” […] What
is regular and predictable about business behaviour is plausibly subsumed under the
heading “routine”. (Nelson and Winter, 1982:14)
There are three classes of routines; according to Nelson and Winter (1982). Routines
that govern short-run behaviour (“operating characteristics”) relates what a firm does at
any time, given its prevailing stock of plant, equipment, etc. The second are determined
by the period-by-period augmentation or diminution of the firm’s capital stock. And the
third ones are the firms that posses routines to change over time various aspects of their
operating characteristics.
Taking this from other perspective, business firms have objectives that they pursue.
Profit is the only business objective explicitly recognized. But the theory of Nelson and
winter explain that there it is also “models of profit-maximizing behaviour”. (Nelson
and Winter, 1982:30)
There is also the perspective that routines are named capabilities. Capabilities
according to Winter (2000), represent a repository of historical experiences and
organizational learning. In case of “superior performance and unique historical
development, capabilities are assumed to build the foundation for sustainable
competitive advantage.” (Schreyögg and Kliesch, How dynamics can organizational
capabilities be? Towards a dual-process model of capability dynamization, 2007: 914)
Capability does not represent a single resource in the concert of other resources such
as financial assets, technology, or manpower, but rather a distinctive and superior way
of allocating resources. It addresses complex processes across the organization such as
product development, customer relationship, or supply chain management. Cyert and
March (1963) comment, in contrast to rational choice theory and its focus on single
actor decisions, organizational capabilities are conceived as collective and socially
embedded in nature. They are brought about by social interaction and represent a
collectively shared “way of problem-solving”.
This new evolutionary economic theory, presents three basic sources, or by thus tell
it, sources the ones in which Nelson and Winter were inspired and based their writings.
A brief annotation of these three sources is done, and is explained how did they affect or
how they were a natural-born resource for this theory.

2.1.1 SCHUMPETER1 THEORY

He branded innovation as deviation from routine behaviour, and argued that
innovation continually upsets equilibrium.
First, he wanted to abandon the static method of analysis in favour of a dynamic
approach. Accordingly, he re-interpreted the (static) notion of equilibrium in terms of a
dynamic approach as a stationary state of an economy. Taken literally, such a state is
rarely attained in reality because of disruptions emanating from outside the sphere of
economics. Schumpeter therefore used the notion of a ‘‘circular flow’’ to characterize
the state of affairs in which ordinary businesses and routines prevail in the behaviour of
economic agents, and where nothing significantly new happens even if some data
change due to exogenous disturbances. Consistent with this understanding, the second
innovation Schumpeter introduced was the idea that there are also changes in the
economy that are caused endogenously. Since actual economic development—
according to Schumpeter (1934: 58; quoted from Witt, 2002:12) consisting of a
sequence of historical states where each particular one can only be understood in the
light of the preceding ones— is obviously not caught in a circular flow at all times,
economic theory is confronted with the question of what makes the development depart
from states of circular flow. According to Witt (2002:12), Schumpeter argued that an
answer could not be achieved in terms of an equilibrium theory, as such a theory
describes a development that ‘‘contains nothing, which suggests the possibility of
development intrinsically generated from within itself ’’.
Deepening us a little in Witt’s (2002) research of Schumpeter, we have here that to
Schumpeter, the carrying out of new combinations is a unique achievement which only
‘‘entrepreneurs’’ are able to accomplish where, contrary to the usual definition, being an
‘‘entrepreneur’’ is not denoting an occupation or a profession (and even less capital
ownership), but rather denotes a capacity or function.

2.1.2 BIOLOGIST THEORY2

From here is taken the idea of an economic “natural selection”. Nelson and Winter
(1982:9) pointed here that the market environments provide a definition of success for
business firms, and that definition is very closely related to their ability to survive and
grow.
Nelson and Winter (1982:9) take the view of “organizational genetics” as the
processes by which traits of organizations, including those traits underlying the ability
to produce output and make profits, are transmitted through time.
“The routines play the role that genes play in evolutionary theory. They are a
persistent feature of the organism and determine its possible behaviour; they are

1
Joseph Alois Schumpeter (February 8, 1883 – January 8, 1950) was a Moravian born
economist and political scientist. He was one of the most influential economists of the
20th century. (Richard Swedberg, Schumpeter: A Biography. Princeton: Princeton Uni
Press, 1991; quoted from http://en.wikipedia.org/wiki/Schumpeter)
2
It based chiefly in the work of Darwin about the theory of the evolution of the species.
heritable in the sense that tomorrow’s organisms generated from today’s have many of
the same characteristics, and they are selectable in the sense that organisms with certain
routines may do better than others, and, if so, their relative importance in the population
is augmented over time”. (Nelson and Winter, 1982: 14)
Winter (1964) had already argued that the models served to stress in particular the
distinction (and relationship) between a behavioural routine or rule and a particular
action.
Winter (1971) made the connection to the work of the behavioralists, proposing that
the observed role of simple decision rules as immediate determinants of behaviour, and
operation of the satisfying principle in the search process for new rules, provided the
required genetic mechanism.

2.1.3 BEHAVIORALISM3 THEORY

Cyert and March (1963) commented that man’s rationality is “bounded”. Relatively
simple decision rules and procedures are used to guide action.
Behavioralism as stated in the classical work of Cyert and March (1963), was
explicitly methodological individualist in stressing that organizational theory must be
built from an individual-level foundation of bounded rationality.
Felin and Foss (2004) have written that for Simon (1945), the whole view of
administrative behaviour revolves around the individual, mentioning “… the factors that
that will determine with that skills, values, and knowledge the organization member
undertakes his work. These are the ‘limits to rationality’ with which the principles of
administration must deal” (Simon 1945:46; quoted from Felin and Foss, Organizational
Routines: A Sceptical Look, 2004: 6)
Simon (1945) describes a number of dimensions along which "classical" models of
rationality can be made somewhat more realistic, while sticking within the vein of fairly
rigorous formalization. These include, limiting what sorts of utility functions there
might be, recognizing the costs of gathering and processing information and the
possibility of having a "vector" or "multi-valued" utility function.
The second concept related to the theory of administrative behaviour is satisficing.
“Satisficing is a behaviour which attempts to achieve at least some minimum level of a
particular variable, but which does not strive to achieve its maximum possible value.
The most common application of the concept is in administrative behavior, which,
unlike classical economic accounts, postulates that producers treat profit not as a goal to
be maximized, but as a constraint. Under these theories, although at least a critical level
of profit must be achieved by firms; thereafter, priority is attached to the attainment of
other goals”. (Simon, Herbert, "A Behavioural Model of Rational Choice", in Models of
Man, 1957, quoted from Mike Wade,
http://www.istheory.yorku.ca/theoryofadministrativebehavior.htm, 2005)

3
Behaviorism or Behaviourism, also called the learning perspective, is a philosophy of
psychology based on the proposition that all things which organisms do — including
acting, thinking and feeling—can and should be regarded as behaviors. (Skinner, B.F.
"The operational analysis of psychological terms”, 1984, quoted from
http://en.wikipedia.org/wiki/Behaviorism)
 3 CONCEPT OF ROUTINE AS CORE

3.1 THE ORGANIZATION CONSISTS OF ROUTINES

Chiefly, the Orthodox theory treats “know how to do” and “knowing how to choose”
as very different things; Nelson and Winter (1982) treat them as very similar. The
Orthodoxy theory assumes that somehow “knowledge of how to do” forms a clear set of
possibilities bounded by sharp constraints, and that “knowledge of how to choose”
somehow is sufficient so that choosing is done optimally; the position of Nelson and
Winter (1982:52) is that “the range of things a firm can do at any time is always
somewhat uncertain prior to the effort to exercise that capability, and that capabilities to
make good choices in a particular situation may also be of uncertain effectiveness”.
For Cyert and March (1963), the “goals” or “objectives” of the firm cannot be
characterized by an objective function of a grand optimization that imposes a coherent
structure on a firm’s actions. In their view, the questions of the firm’s objective, in that
sense, can never be resolved because it would involve too much time-consuming
bargaining over too many hypothetical choices. Instead of that, the firm persists in a
state of “quasi-resolution of conflict”. “The firm’s goals may be conceived as a kin to
the terms of a treaty among the participants, according to which they will jointly seek to
deal with their common environment”. (Nelson and Winter, 1982:55)
Taking into account the importance of what is the business, and their function in the
daily life, Nelson and Winter (1982) stressed how the purposes or objectives like profit,
market share, or growth do not serve to guide action in the absence of specific
understanding as to how they are to be achieved. “Unless this understanding is obvious,
shared by all those who are involved in decision making, even the deepest commitments
to a common ultimate objective will not serve to focus attention and coordinate action.
To serve this purpose, objectives must be articulated in such a way that they are relevant
to the decisions at hand. Operational objectives must be defined in terms of the
predictable consequences of the own action of the operational members”. (Nelson and
Winter, 1982:56)
“The behaviour of an organization is reducible to the behaviour of the individuals
who are members of that organization. Therefore is to be expected to have
consequences at the organizational level because of the individual behaviour”. (Nelson
and Winter, 1982:73)
Therefore they remark that individual skills are the portrait in a mirror of
organizational routines.
“Routinization is relatively more important as a feature of organizational behaviour
than skill is as a feature of individual behaviour, […] close examination of the nature of
skilful/routinized behaviour brings to light the shortcomings of optimization notions as
an approach to understanding the basis of the effective functioning of an
individual/organization in an environment”. (Nelson and Winter, 1982:73)
“The choice among behaviour options that takes place in the exercise of a skill
typically involves no deliberation and it is a constituent of the capability that the skill
represents”. (Nelson and Winter, 1982:82)
They also comment that for a chosen behaviour, it has to be chose a skill that would
involve another coordinated sequential behaviours.
Skilful acts of selection from the available options are constituents of the main skill
itself: they are “choices” embedded in a capability (March and Simon 1958: 26, 141-
142; Schank and Abelson, 1977: 42-47; quoted from Nelson and Winter, 1982:85).
“Deliberate choice plays a narrowly circumscribed role, limited under normal
circumstances to the selection of the large-scale behavior sequence to be initiated. This
suppression of choice is certainly associated with, and is probably a condition for,
smoothness and effectiveness that skilled behaviour confers. On the other hand, it is
possible for choice to intrude into the skilled performance. Option selections that are
normally automatic may be made deliberately, or behaviour may be diverted entirely
from the deep channels of skill. The modification of skilled performance by deliberate
choice greatly expands the potential diversity, flexibility, and adaptability of
behaviour”. (Nelson and Winter, 1982:85)
Nelson and Winter (1982) they explain that, a typical member of an organization has
certain type of abilities (skills) or routines that they bring with themselves. That group
of routines that that member can do in a determined environment is known as repertoire
of the member. Although the activities of other working members affect the local
working environment of a particular member, and thereby his feasible behaviour, it is to
be understood that strictly concurrent action by other members is not a precondition for
his performance.
“The routinization of activity in an organization constitutes the most important form
of storage of the organization’s specific operational knowledge, […] Organizations
remember by doing”. (Nelson and Winter, 1982:99)
The idea that present here Nelson and Winter (1982), is that the organization
"remember" a routine among more execute it, very is seemed to say that an individual
recalls the abilities upon employing them. What is required for the organization to
continue in routine operation is simply that all members continue “know their jobs” as
those jobs are defined by the routine.
“What is central to a productive organizational performance is coordination; what is
central to coordination is that individual members, knowing their jobs, correctly
interpret and respond to the messages they receive. The interpretations that members
give to messages are the mechanism that picks out, from a vast array of possibilities
consistent with the roster of member repertoires, a collection of individual member
performances that actually constitute a productive performance for the organization as a
whole”. (Nelson and Winter, 1982:104)
In the sense that the memories of individual members do store so much of the
information required for the performance of organizational routines, there is substantial
truth in the proposition that “the knowledge an organization possesses is reducible to the
knowledge of its individual members”. (Nelson and Winter, 1982:104)
In the Chapter V from Nelson and Winter (1982), they mentioned that sanctions, as a
rule-enforcement mechanism play a crucial but limited role in making routine possible.
They see it as they were crucial in keeping the underlying conflicts among organization
members from being expressed in highly disruptive forms.
“When one considers routine operation as the basis of organizational memory, one is
led to expect to find routines patterned in ways that reflect characteristics of the
information storage problem that they solve. When one considers routine operation as
involving a truce in intra-organizational conflict, one is led to expect routines to be
patterned in ways that reflect features of the underlying problem of diverging individual
member interests”. (Nelson and Winter, 1982:110)
As an example, when deliberately we create a complex new routine where did not
exist before, the members of the organization have to learn the new system. They will
have to add new skills to their repertoire, and they need to achieve a first reconciliation
of their expectations regarding the distribution of costs and benefits in the situation. In
such a context- for example, the initial operation of a new plant- the eventual
achievement of a state of routine operation also serves as target for managerial effort,
much as it does in the context of control of an existing routine.
“An organization is not a perpetual motion machine; it is an open system that
survives through some forms of exchange with its environment”. (Nelson and Winter,
1982: 113)
The organization’s routine, considered as an abstract “way of doing things”, is an
order that can persist only if it is imposed on a continually changing set of specific
resources. Some part of this task of imposing the routine’s order to new resources is
itself handled routinely; another part is dealt with by “ad hoc problem-solving efforts”.
Either the routinized or the ad hoc part of the task may fail to be accomplished if the
environment does not cooperate. (Nelson and Winter, 1982: 113)
The “selecting” function described is what purchasing and personnel departments do.
Some “modifying” is also dome by the personnel department and by trainers,
supervisors, and co-workers, or, for non-human inputs, by engineers or production
workers. “Monitoring” is done by line supervisors, but is also an aspect of financial
control and of quality control. However, the fact that such routinized arrangements exist
does not assure that they are comprehensive or fully efficacious. Some input selection
problems arise too infrequently to be dealt with routinely. (Nelson and Winter, 1982:
114)
“The organizational routine will mutate”… Mutations, of course, are not always
deleterious. Maintenance of prevailing routine is “often an operational target, but is not
an ultimate objective”. Modifications of routine that involve improvements in role
performance are presumably welcome. (Nelson and Winter, 1982: 116)
The fact that organizations need to have routinized forms of resistance to unwanted
change in routines thus becomes yet another reason why organizational behaviour is so
strongly channelled by prevailing routine.
“Understanding of individual skills informs understanding of organizational
capabilities in two ways. First, because individuals exercise skills in their roles as
organization members, the characteristics of organizational capabilities are directly
affected by the characteristics of individual skilled behaviour. Then the inflexibility of
behaviour displayed by large organizations is attributable in part to the fact that
individual skills become rusty when not exercised; it is therefore hard for an
organization to hold in memory a coordinated response to contingencies that arise only
rarely”. (Nelson and Winter, 1982: 124)
Organizational behaviour seems to be subject to magnified versions of problems and
pathologies that afflict individual skilled behaviour. Nelson and Winter remark that
routines are the skills that an organization have. Therefore to understand better the core
capabilities in the ones the organization is affected by the routines we should take a look
to the next part of the work.

3.1.1 COORDINATION AND CONTROL

The coordinative power of routines derives from several sources: according to Grant
(1996), from their capacity to support a high level of simultaneity; for Bourdieu (1992),
from giving regularity, unity and systematicity to practices of a group; for March and
Olsen (1989), from making many simultaneous activities mutually consistent; for Simon
(1947), from providing each of the actors with knowledge of the behaviour of the others
on which to base her own decisions; and for Nelson and Winter (1982), from providing
instructions in the form of programs; and from establishing a truce. (Becker,
Organizational Routines, 2004: 654)
Becker (2204: 655) says that a routine behaviour is easier to monitor and measure
than non-routine behaviour. The more standardized the behaviours are, the easier to
compare. The easier to compare, the easier to control these behaviours.

3.1.2 TRUCE
“Although rule-enforcement mechanisms play a crucial role in making routine
operation possible, their role is limited. Because it is always possible to either
circumvent rules to some extent, or to follow written rules by the letter and thereby
decrease performance, control systems leave a zone of discretion. Discretion awards
some bargaining power to those who execute orders”. (Becker, Organizational Routines,
2004: 655)
Without the notion of truce, Becker (2004:654) explains that one would have to
explain how the different social relationships that permit the activation of the routine are
themselves established in each period, and maintained over longer periods of time.

3.1.3 ECONOMIZING ON CONGNITIVE RESOURCES

Attention has to be allocated selectively (Cyert and March, 1963). Simon (1947)
makes here and important point saying that routines economize on the limited
information processing and decision-making capacity of agents. By prevising limited
information-processing and decision-making capacity, they increase the potential for
focused attention. (Becker, Organizational Routines, 2004: 657)
“Routines also economize on the time necessary for reaching a solution, allowing for
spontaneous reactions even under constraint situations, such as time constraints”
(Betsch et al., 1998, quoted from Becker, Organizational Routines, 2004: 657)

3.1.4 REDUCING UNCERTAINTY

“Uncertainty poses problems in decision-making because the likelihood of each
outcome from a set of possible specific outcomes is initially unknown. The standard
strategy to deal with such uncertainty is therefore to increase the amount of information,
improving the basis of estimation of the probabilities and their accuracy”. (Becker,
Organizational Routines, 2004: 657)
Weiss and Ilgen (1985) commented that in situations of uncertainty, particular
pervasive uncertainty, routines make an important contribution to actors’ ability to pick
a course of action. (Becker, Organizational Routines, 2004: 657)
“Routines are a necessity, because without them, policy formulation and
implementation would be lost in a jungle of detail and uncertainty” (Inam, 1997: 200,
quoted from Becker, Organizational Routines, 2004: 658)
 3.1.5 STABILITY
There are two different arguments for why routines provide stability. The argument
of the Carnegie school provided from Cyert and March (1963) is that as long as an
existing routine gives satisfactory results, no conscious cognitive problem solving is
triggered to find another way to achieve the task. The other argument is a cost
argument: whenever a mode of executing a particular task is changed, this entails costs.
(Becker, Organizational Routines, 2004: 659)
Stability provides a baseline against which to assess changes, compare and learn
(Langlois, 1992, quoted from Becker, Organizational Routines, 2004: 659). Without a
stable base line to compare with, drawing inferences from changes is impossible
(Knudsen, 2002, quoted from Becker, Organizational Routines, 2004: 659). The
stability-providing effect of routines is therefore important for learning. Nelson and
Winter (1982) also remark that “stability”, furthermore, gives rise to predictability,
which in turn aids coordination.

3.1.5 STORING KNOWLEDGE

“The routinization of activity in an organization constitutes the most important form
of storage of the organization’s specific operational knowledge”. (Nelson and Winter,
1982: 99)
The concept of routines is helpful for understanding how the productive knowledge
of firms (in particular “tacit knowledge”) is stored, applied, decays and changes.
(Becker, Organizational Routines, 2004: 660)
“Productive knowledge can be held by individuals and/or the organization.
Organizations structure the activity of its members, including activity in which their
individually held knowledge is applied. Routines thus capture the ‘individually-held-
knowledge-applied-in-the-firm’ at its joints, namely, in its application. At the same
time, routines also capture collectively held knowledge. Such knowledge could in
principle be held in several knowledge repositories, for instance in documents,
databases, artefacts and physical layout. Tacit knowledge however, can not be held in
such repositories”. (Becker, Organizational Routines, 2004: 661)
 4 CHARACTERISTICS OF ROUTINES
To reinforce the concept of Routines and to understand how precisely the concept of
routines fits into the theories of organizational and economic change, I provide an
overview of concepts that will help us to understand the current characteristics that are
involved in practice of the routines.

4.1 PATTERNS
Sidney Winter (1964: 263, quoted from M. C. Becker, Organizational Routines,
2004: 645) defined a routine as “pattern of behaviour that is followed repeatedly, but is
subject to change if conditions change”.
Arthur Koestler (1967: 44, quoted from M. C. Becker, Organizational Routines,
2004: 645) defined routines as “flexible patterns offering a variety of alternative
choices”.
The general term for all regular and predictable behavioural patterns of firms is
“routine” (Nelson and Winter, 1986: 14)
Four different terms are used for denoting the “content” of the patterns: action,
activity, behaviour and interaction. (M. C. Becker, Organizational Routines, 2004: 645)
“Behaviour” is distinguished from “action” by the fact that it is observable, and that
it is understood as a response to a stimulus. “Interaction” is a subset of “action”,
referring to such action that involves multiple actors. The term “interaction” therefore
clearly establishes a distinction between the individual and the collective level. (M. C.
Becker, Organizational Routines, 2004: 645)
Historically, the term “routines” is clearly referred to recurrent interaction patterns,
that are also, collective recurrent activity patterns.
Also, many empirical studies document routines as patterns of “interaction”. Just to
mention: Cohen and Bacdayan, 1994; Pentland and Rueter, 1994; Zellmer-Bruhn, 1999,
2003; Burns, 2000; Costello, 2000. (M. C. Becker, Organizational Routines, 2004: 645)

4.2 RECURRENCE
Winter (1990), mentioned that Recurrence is a key characteristic of routines (M. C.
Becker, Organizational Routines, 2004: 645)
“It is known by the term 'replicator-interactor model' (Hull 1980; 1981; Dawkins
1982a; 1982b). It distinguishes two elements of the replication process, 'replicators' and
'interactors'. A replicator is an 'entity which passes its structure directly in replication'
(Hull 1981, 41). Its characteristics are longevity (potential immortality through copies
even if the individual copy has a short life), fecundity (a high number of copies), and
fidelity (accurate production of copies). An interactor is an entity that interacts as a
cohesive whole with its environment in such a way that this interaction causes
replication to be differential”. (Markus C. Becker and Nathalie Lazaric, Roads to
explaining the recurrence of organizational routines, Colloque de Lyon 2 et 3 décembre,
2006 4)

4
http://www.ish-
lyon.cnrs.fr/labo/walras/Objets/New/Colloqueinst/06Becker_Lazaric.pdf
 4.3 COLLECTIVE NATURE
Routines are “collective phenomena” (Nelson and Winter, 1982: 73). Involving
multiple actors. “Skills” are reserved to the individual level and “routines” to the
organizational level (Dosi et al., 2000: 5, quoted from M. C. Becker, Organizational
Routines, 2004: 645).
Organizational routines can be distributed means that when we involve multiple
actors to carry out one routine, we involve a variety of actors in different locations.
(Simon, 1992; Winter, 1994, quoted from M. C. Becker, Organizational Routines, 2004:
645)

4.4 MINDLESSNESS vs. EFFORTFUL ACCOMPLISHMENT

“Proponents of the first position maintain that individuals often follow routines
without devoting attention to them. They do not draw on substantial cognitive resources
from the realm of consciousness (Weiss and Ilgen, 1985; Gersick and Hackman, 1990).
Proponents of the second position, on the other hand, argue that organizational routines
are not mindless but “effortful accomplishments” (Pentland and Rueter, 1994: 488;
Costello, 2000). Serious disagreement therefore divides the literature. What is notable
about this divide is that it largely runs along the line of conceptual vs. empirical work”.
(M. C. Becker, Organizational Routines, 2004: 648)

4.5 PROCESSUAL NATURE

Routines are a unit of analysis that is processual in nature, therefore all the potential
of the concept of routines when we want to explain change.
Routines occupy “the crucial nexus between structure and action, between the
organization as an object and organizing as a process” (Pentland and Rueter, 1994:
484). This is why they provide a “window” to the drivers underlying change, enabling
us to observe change in more detail. Because routines provide some degree of stability,
they provide a contrast required to detect novelty. It is in this way, that routines enable
researchers to map organizational change- as incremental change of the routines
themselves. (M. C. Becker, Organizational Routines, 2004: 649)

4.6 CONTEXT-DEPENDENCE, EMBEDDEDNESS AND

SPECIFICITY
“Routines are embedded in an organization and its structures, and are specific to the
context (Cohen et al., 1996). Context matters because of complementarities between
routines and their context. The notions of “scaffolded action” (Clark, 1997) and
“situated action” (Suchman, 1987) illustrate how action relies on external support.
External structures (e.g. artifacts) help to control, prompt and coordinate individual
actions. Such an idea is consistent with the notion that general rules and procedures
have to be incompletely specified when transferred across contexts, precisely because
contexts are different. As a consequence, the application of general rules to specific
context always involves incomplete specification and missing components (Reynaud,
1998). Interpretation and judgement skills are required for completing general rules,
such as, for example, to know what routines to perform when (Nelson and Winter,
1982). Furthermore, for Cohendet and Llerena, (2003), context matters because it leads
to routines that strongly differ in terms of power of replication, degree of inertia and
search potential. (M. C. Becker, Organizational Routines, 2004: 651)
Several kinds of specificity have been identified in the literature: historical
specificity (Reynaud, 1996), local specificity (Simon, 1976) and relation specificity
(Dyer and Singh, 1998). Historical specificity derives from the fact that whatever
happens does so at a certain point of time, which is characterized by a certain
constellation of environmental factors and interpretative mindsets (Reynaud, 1996).
Because such constellations will be complex, the probability that routines can be
replicated exactly is low (Rivkin, 2001). Local specificities also arise because routines
are outcomes local learning processes (Egidi, 1992), and because of cultural differences
and limits to generalization arising from those (Simon, 1976). (M. C. Becker,
Organizational Routines, 2004: 651)
Limits to the transfer of routines to other contexts are the most important implication
of specificity. When removed from their original context, routines may be largely
meaningless (Elam, 1993). […] An important consequence of limits to the
transferability of routines across different contexts is that no such thing as a universal
best practice can possibly exist (Amit and Belcourt, 1999). There can be only local
“best” solutions. (M. C. Becker, Organizational Routines, 2004: 652)

4.7 PATH DEPENDENCE

It is well recognized in the literature that routines change in a path-dependent manner
(David, 1997) and are shaped by history (Nelson and Winter, 1982). Routines may
adapt to experience incrementally in response to feedback about outcomes, but they do
so based on their previous state (Levitt and March, 1988). (M. C. Becker,
Organizational Routines, 2004: 653)

Path dependent development of routines means that because one can get stuck on a
path, along which the routine develops over time, the starting point matters. An
additional difficulty in re-tracing the origin of the routine and “re-setting” the routine to
its state at an earlier point of time is that “the experiential lessons of history are captured
by routines in a way that makes the lessons, but not the history, accessible to
organizations and organizational members who have not themselves experienced the
history” (Levitt and March, 1988: 320, quoted from M. C. Becker, Organizational
Routines, 2004: 653).
Without knowledge of the reasons, why a certain path was accepted in the past, it is
impossible to reconstruct the path and the problems in the ones the routine was
originally the solution.

4.8 TRIGGERS
Routines are triggered (Nelson and Winter, 1973; Weiss and Ilgen, 1985). Two kinds
of triggers can be distinguished: actor-related triggers and external cues. One form of
external cues are links between routines. For instance, at the end of the budgeting
routine in the marketing department, a routine for requesting the approval of the budget
for a marketing campaign is triggered at the finance department. Aspiration levels are a
powerful form of actor-related trigger of routines (Cyert and March, 1963; Levinthal
and March, 1981, quoted form M. C. Becker, Organizational Routines, 2004: 653-654)
 Experimental results indicate that negative feedback acts as a more powerful trigger
of routines than positive feedback (Schneier, 1995; Avey, 1996, quoted from M. C.
Becker, Organizational Routines, 2004: 654)
 5 INNOVATIONS AND ROUTINES
“The routines concept seems to be promising for understanding how firms generate
innovation because routines are a unit of analysis of the behaviour of organizations
(Nelson & Winter, 1982) and thus, for identifying the sources of successful product
development inside the firm”. (Becker, M. C. & Zirpoli, F., Innovation routines -
Exploring the role of routines for innovation, Paper presented at the International
Schumpeter Society Conference, 2006: 6)
Stability (such as induced by procedures) is a prerequisite for being able to innovate.
Prerequisite, are procedures for virtual experimentation provide important prerequisites
for successful product development. (Becker, M. C. & Zirpoli, F., Innovation routines -
Exploring the role of routines for innovation, Paper presented at the International
Schumpeter Society Conference, 2006: 24)
“The innovative thrust of an organisation appears to be influenced not only by
individual factors such as the creativity of engineers (a wide-spread idea, at least
implicitly). Rather, organizational means seem to hold the key (both in providing the
prerequisites and the ‘switch’ between exploitative or explorative use.) Amongst those
organizational means, procedures (and the ensuing recurrent behavior patterns) seem to
have a particularly important role”. Whether the use of virtual simulation will lead to
innovative designs, on the other hand, depends almost entirely on the alignment and
fine-tuning of the procedures to the tools and the organization structure and
management system.The routinized accomplishment of innovation tasks can be an
endogenous source of innovations – not just of incremental innovations (exploitation),
but of radical innovations as well (exploration). (Becker, M. C. & Zirpoli, F.,
Innovation routines - Exploring the role of routines for innovation, Paper presented at
the International Schumpeter Society Conference, 2006: 27)
Considering the analogue of Schumpeter’s “circular flow” at the level of the
individual organization, we portray a situation that is unchanging or cyclically
repetitive. We then gradually introduce into the picture more of the processes of change,
displaying some of the connections between planned change and unplanned change, and
examine finally the role of routine and innovation. (Nelson and Winter, 1982: 98)
“Innovation” involves change in routine. The consequences of employing the
innovation- changing the routine- in general will not be closely predictable until a
reasonable amount of actual operating experience with it has been accumulated. […]
One way in which the routine functioning of an organization can contribute to the
emergence of innovation is that useful questions arise in the form of puzzles or
anomalies relating to prevailing routines. (Nelson and Winter, 1982: 129)
“It is significant that the problem-solving responses routinely evoked by difficulties
with existing routines may yield results that lead to major change. […] Problem-solving
efforts that are initiated with the existing routine as a target may lead to innovation
instead”. (Nelson and Winter, 1982: 130)
Nelson and Winter (1982) in the page 130, make a comment that Schumpeter
(1934:65-66) used to describe innovations, saying that innovations are a “Carrying out
of new combinations”.
Innovations in the routine of the organization consist similar, in large part, of new
combinations of existing routines. An innovation cannot imply anything more than the
establishment of new patterns of information and material flows among existing
subroutines.
“When an effort is made to incorporate an exiting routine as a component of
innovative routines, it is helpful if to conditions are satisfied. One is that the routine be
reliable- fully under control. […] The second condition is that the new application of
existing routine be as free as possible from the sorts of operational and semantic
ambiguities of scope in connection with individual skills”. (Nelson and Winter, 1982:
131)
The fundamental uncertainty surrounding innovative activity is uncertainty about its
results.
“Routinized arrangements for producing innovations and solutions to problems take
a variety of forms, among which are some very familiar features of the organizational
scene. […] Whether useful results are actually achieved is another matter. In fact,
results that are more or less useful are often achieved- and it is an important feature of
these problem-solving situations that the superior results that in some sense “could”
have been achieved are usually not available as standard of comparison”. (Nelson and
Winter, 1982: 132)
Schumpeter proposed in his book Capitalism, Socialism and Democracy (1950), that
during the twentieth century the modern corporation had “routinized innovation”.
Nelson and Winter (1982) proposed that the organizations in the twentieth century
have bunch of well-defined routines for support and direction of their innovative efforts
that they make on the daily work.
 6 PATH DEPENDENCIES
Levinthal (2000) says, Capabilities are conceptualized in the context of collective
organizational problem-solving. Capable firms are assumed to solve emerging problems
effectively. A capability, however, is not attributed unless outstanding skills have
proved to have solved extraordinary problems (otherwise competitive advantages could
not be built). In most cases extraordinary tasks and skills are understood in terms of
complexity. […] The notion of complexity refers to the characteristics of problem
situations and decision making under uncertainty (Duncan, 1972), addressing
ambiguous, illstructured tasks (March and Simon, 1958). The complexity of a capability
therefore reflects the internal requirements for mastering complex tasks. For Dosi
(2003), Problem-solving can be defined as a sequence of generating complex
combinations of cognitive and habitual acts. (Schreyögg and Kliesch-Eberl, How
dynamic can organizational capabilities be? 2007:915)
Capabilities are close to action; conceptually they cannot be separated from acting or
practicing. At the same time, embedding organizational capabilities in practicing or
doing means that capability represents more than explicit knowledge; it covers more
dimensions of an action: emotions, tacit knowing, and bodily knowledge (Polanyi,
1958, 1966). Practicing a capability therefore means a ‘generative dance’ (Cook and
Brown, 1999) between explicit and tacit elements. Furthermore, capabilities are bound
to performance; they are conceived as doing something that ‘must be recognized and
appreciated’ (Gherardi and Nicolini, 2002: 421; Weinert, 2001). They are only
recognized and attributed to a performing social entity in the case of a success (as
compared to other organizations, which are less capable at reaching such effective
solutions). (Schreyögg and Kliesch-Eberl, How dynamic can organizational capabilities
be? 2007:915)
Capabilities represent a reliable pattern: a problem-solving architecture composed of
a complex set of approved linking or combining rules.
“A singular success can trigger the building of a capability but a capability is not
actually constituted unless a reliable ‘practice’ has evolved over time. By implication,
an organizational capability is also a historical concept by its very nature, integrating
past experiences with the present problem-solving activities and a prospect for future
direction of resource allocation”. (Schreyögg and Kliesch-Eberl, How dynamic can
organizational capabilities be? 2007:915)
The fact that time is a basic dimension of capabilities is when we stressing the
historical nature of organizational capabilities.
Capability development takes time, and the specific way in which time has been
taken (i.e., the intensity, frequency, and the duration of social interactions) is relevant
for the gestalt of a capability. “Any organizational capability is the result of an
organizational learning process, a process in which a specific way of ‘selecting and
linking’ resources gradually develops”. ”. (Schreyögg and Kliesch-Eberl, How dynamic
can organizational capabilities be? 2007:916)
One reason why organizations are often overly persistent in their strategic orientation
is path dependence in capability-based activity. Path dependency means first of all that
‘history matters’ (David, 1985), i.e., that a company’s current and future decision
capabilities are imprinted by past decisions and their underlying patterns (Cowan and
Gunby, 1996, quoted from Schreyögg and Kliesch-Eberl, How dynamic can
organizational capabilities be? 2007:916)
Once successful combinatorial activities generate positive feedback loops, then we
have that they are emergent of constituting self-reinforcing processes.
 “Organizational capabilities or core competencies are prone to become fixed to the
constellations in which they proved to be successful. If the constellations do not change
significantly, this latent fixation does not add up to a problem”. ”. (Schreyögg and
Kliesch-Eberl, How dynamic can organizational capabilities be? 2007:916)
Hannan and Freeman (1984: 153, quoted from Schreyögg and Kliesch-Eberl, How
dynamic can organizational capabilities be? 2007:915) stress the importance of the
‘unusual capacity to produce collective outcomes of a certain . . . quality repeatedly’ for
the survival and sustainable success of an organization, insofar as they consider
‘organizational inertia’ as a precondition for organizational success. Inertia is needed in
order to make an organization reliable and identifiable as a distinct unit. It is therefore a
requirement for guaranteeing survival.
Paradoxically, exactly this inertia brings about the risk of a bad adaptation. Dealing
with a changing environment, organizations are bound to their stabilized structures and
action patterns. Central to survival is the ability to overcome organizational inertia.
“The economic dimension focuses on resource investments. On the one hand, firm-
specific (and therefore sticky) investments are needed to built heterogeneity and
superior performance, i.e., to generate high quality, economies of scale, etc. (Ghemawat
and Del Sol, 1998). On the other hand, investments in firm-specific resources are likely
to be irreversible and rigid because the cost of separating and abandoning such sticky
resources is too high. In consequence, resource commitment tends to restrict an
organization’s options and flexibility (Bercovitz, de Figueiredo, and Teece, 1996). The
more dynamic the environment, the higher is the implied flexibility risk (Winter, 2003).
The inherent tendency of capabilities to persist, amounts to a strategic threat which
cannot be neglected. The management faces a paradoxical situation: on the one hand,
the building of complex and reliable problem-solving architecture constitutes strength
and allows for developing sustainable competitive advantages. On the other hand, this
advantageous side of capabilities is, however, attained by (unconsciously) suppressing
alternatives, pluralistic ignorance and reduced flexibility. Any capability therefore
contains an inherent risk, i.e., the risk of rigidity and helplessness in the face of
fundamentally changing conditions”. (Schreyögg and Kliesch-Eberl, How dynamic can
organizational capabilities be? 2007:918-919)
 7 DYNAMIC CAPABILITIES
The notion of dynamic is devoted to addressing the continuous renewal of
organizational capabilities, thereby matching the demands of (rapidly) changing
environments. The concept of dynamic capabilities revises de Resource Based View
(RBV) insofar as not only the markets but also the organizational capabilities are
conceptualized as being dynamic and flexible (Helfat and Peteraf, 2003: 998, quoted
from Schreyögg and Kliesch, How dynamics can organizational capabilities be?
Towards a dual-process model of capability dynamization, 2007: 914)
“What is still more intriguing is the fact that even when they are aware of the need to
change and willing to change capabilities, the hidden imprints of the capability pattern
may lead them to look for alternatives only in the neighbourhood of the current
practices (Johnson and Johnson, 2002). Thus, managers reinforce current capabilities
(via project budgeting and investment policy), thereby unintentionally suppressing new
unconventional project initiatives (Burgelman, 2002b; Leonard- Barton, 1992). The
core idea of total dynamization is to transform the conception of capabilities into full-
blown adaptability—at least in high-velocity markets. Based on a differentiation
between different degrees and patterns of dynamic capabilities, a contingency approach
of dynamization depending on the degree of market dynamic is advocated (Eisenhardt
and Martin, 2000). A clear distinction is drawn between moderately dynamic and
highvelocity markets. Accordingly, two broad classes of dynamic capabilities are
introduced. ‘Moderate dynamic markets’ require dynamic capabilities, which come
close to the classical conception of capabilities, i.e., the pattern-driven conception of
problem-solving with some incremental changes. The real challenge, however, is seen
in the second case, namely mastering high-velocity environments with rapidly and
discontinuously changing market conditions and rules (Bourgeois and Eisenhardt,
1988). Radical dynamic capabilities are conceived to master this volatility. The linking
and selection process has to continuously create new combinations of resources: ‘They
are in a continuously unstable state’ (Eisenhardt and Martin, 2000: 1113). Dynamic
capabilities in this sense build different types of capabilities, which amount to
experiential, improvisational, and highly fragile processes of reconfiguration,
integration, and acquisition of resources. They make use of real-time information,
simultaneously explore multiple alternatives, rely on quickly created new knowledge,
are governed by very few simple rules, do not get stored in the organizational memory,
and thus do not produce predictable outcomes. Their strength no longer flows from
architecture but rather from its ability to continuously produce new constellations and
solutions. The new basis for building competitive advantages is seen in the
encompassing capability to change very quickly and to master unforeseeable
environmental demands (Eisenhardt, 2002)”. (Schreyögg and Kliesch-Eberl, How
dynamic can organizational capabilities be? 2007: 919)
Dynamic capabilities are conceived to be the mechanisms of adapting, integrating,
and reconfiguring integrated clusters of resources and capabilities to match the
requirements of a changing environment: ‘The term “dynamic” refers to the capacity to
renew competencies’ (Teece et al., 1997: 515, quoted from Schreyögg and Kliesch-
Eberl, How dynamic can organizational capabilities be? 2007: 921)
More precisely, dynamic capabilities are conceptualized by three dimensions: 1.
‘Positions’ refers to both internal and external positions. The internal position relates to
the specific set of resources available in a firm (financial, technological, reputational,
and structural). The external side refers to the specific market position/assets of the
focal firm. The current position of a firm determines to a certain extent the future
decisions a firm can reach and realize. 2. ‘Paths’ represents the history of an
organization; i.e., the current position of a firm is basically shaped by the patterns
evolved from the past. And also, where a firm can go in the future depends on its
current paths and their shaping force. 3. The dimension ‘processes’ is at the heart of this
capability conception and is twofold. On the one hand, processes are devoted to
coordinating and integrating available resources. This is understood as being the static
component. On the other hand, processes refer to organizational learning and the
reconfiguration of resources. The latter two sub-dimensions represent the dynamic
component, which is supposed to guarantee permanent adaptation and change of the
organization. The dynamic subdimension ‘learning’ covers both processes of
incremental improvements (amendments of the current positions) and processes of
identifying new opportunities. The second dynamic subdimension ‘reconfiguration’
addresses the transformation of a firm’s asset structure accomplished through alert
surveillance of the environment for discontinuities and subsequent radical changes.
(Schreyögg and Kliesch-Eberl, How dynamic can organizational capabilities be? 2007:
921-922)
Zollo and Winter (2002: 340) expressed that ‘A dynamic capability is a learned and
stable pattern of collective activity through which the organization systematically
generates and modifies its operating routines in pursuit of improved effectiveness’.
(Schreyögg and Kliesch-Eberl, How dynamic can organizational capabilities be? 2007:
923)
 8 CONCLUSION
This work has been developed and inspired basically in explaining the general
development of an economic change, exploring the arguments that are based on the
economic change. I expect that with these few pages the concept of the Economic
Evolutionary Theory of Nelson and Winter have remained illustrious, being this theory
a still very fresh thesis in the academic and professional environment, we can expect
that in the following years its concept will still evolve, being characterized and
identified as a new movement from the point of view of an organization.
The classical point of view, about a total maximization in the business, is a point of
view that is left behind in this theory, setting clear that a business is faced to different
factors in the daily life, for such motive, it should be adapted and commit to do some
things and to stop doing others that provide a better performance and success in the long
term.
Capacities and options are the two pillars with the ones an organization moves in this
theory, I mentioned also that the organization is centred in a form to do the things, and
that these forms will be determined by the behaviour that is reflect by the individual
members of the organization, leaving to see the capabilities that each member provide to
the business, as well as their commitment with the objectives of the firm.
The search for new forms to do the things, will bring new capabilities to the
organization to be adapted in a selective environment, essentially this environment will
be determined by the conditions out of the business that the market impose.
The notion of memory that gives this theory to the organization is somehow new and
it is something that we have to work with. We should understand the organization as a
new way, with other manners and behaviours.
Behaviour that through the path dependencies observed, we will try to change or to
fortify for the improvement of the organization. This will be done through the Dynamic
Capabilities that the members of the business retrieve and its way to adapt them for
subsequently leave behind problems and difficulties and to arrive to the achievement of
objectives.
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