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The Dynamics of Dynamic Capabilities – The Case of Public Broadcasting

Conference Paper  in  International Journal of Business Excellence · September 2013

DOI: 10.1504/IJBEX.2016.074850

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Int. J. Business Excellence, Vol. 9, No. 2, 2016 135

Dynamics of dynamic capabilities – the case of public

broadcasting

Päivi Maijanen* and Ari Jantunen

LUT School of Business,
Lappeenranta University of Technology,
P.O. Box 20, 53851, Lappeenranta, Finland
Email: pmaijane@lut.fi
Email: ari.jantunen@lut.fi
*Corresponding author

Abstract: Our study highlights the internal dynamics of strategic renewal by

exploring the functioning of dynamic capabilities during strategic renewal in a
public organisation facing rapid changes in its environments. The analysis
focuses on how the organisation’s capacities to sense, seize, and reconfigure
manifest themselves in the organisational context, and how they relate to each
other. The empirical data was collected at the Finnish Broadcasting Company
by means of a quantitative survey for all personnel. According to the results,
the dynamic capabilities differ between the organisational sub-units, and the
context affects the way they relate to change performance. In addition, the
sensing capability seems to have an indirect effect on the organisation’s change
performance, mediated by the seizing and reconfiguring capabilities. Our study
conceptually and empirically contributes to the young tradition of applying the
dynamic capability view in the context of public organisations.

Keywords: dynamic capabilities; strategic renewal; public broadcasting;

change performance; sensing capability; seizing capability; reconfiguring
capability; public organisation; path-dependency.

Reference to this paper should be made as follows: Maijanen, P. and

Jantunen, A. (2016) ‘Dynamics of dynamic capabilities – the case of public
broadcasting’, Int. J. Business Excellence, Vol. 9, No. 2, pp.135–155.

Biographical notes: Päivi Maijanen is a PhD student at the School of

Business, Lappeenranta University of Technology, Finland. Her research focus
is the strategic renewal, dynamic capabilities and organisational and managerial
cognition in public organisations. She has many years of experience at the
Finnish Broadcasting Company.

Ari Jantunen is a Professor of Strategy Research at the School of Business,

Lappeenranta University of Technology, Finland. His current primary areas of
research interest are in the resource-based theory, dynamic capability view of
the firm and innovation management. He has published about 40 refereed
articles, some book chapters and about 50 conference papers.

Copyright © 2016 Inderscience Enterprises Ltd.

136 P. Maijanen and A. Jantunen

1 Introduction

In this study, the dynamic capability view (DCV) is applied to explore the internal
dynamics of organisational renewal. We will explore how different types of dynamic
capabilities relate to each other and to their organisational context. Our case-organisation
is the Finnish Broadcasting Company, which is facing multitude of challenges due to
extensive changes in the media markets.
The Finnish Broadcasting Company offers an excellent case to explore an
organisation’s internal dynamics during a strategic change process. Media convergence
and digital technology are challenging the operating logic of broadcasting companies in a
more radical way than maybe ever before. Because of drastic changes in the media
competition, media technologies, and customer behaviour, the established public media
institutions have been forced to rethink and refocus their underlying dominant logic(s)
(Prahalad and Bettis, 1986; Bettis and Prahalad, 1995) and strategic goals. This, in turn,
has resulted in changes to their resource bases, organisational processes, and capabilities
in carrying out new strategies. The changes have been challenging for the rigid and
hierarchical public broadcasting institutions that, for decades, have enjoyed a privileged
position and prospered, with their established routines and assets based on the traditional
content-broadcasting capabilities. However, the new, nonlinear digital content-producing
way of operating has questioned the established ways of doing and directed the change
towards more flexible, innovative, open, and interactive ways of producing content and
meeting the needs of individual customers. All these developments are now challenging
public media companies’ capacity for constant learning and renewal (on challenges of
public broadcasting, see e.g., Nissen, 2006; Bardoel and Lowe, 2007; Bardoel and
d’Haenens, 2008; Leppänen et al., 2010; Lowe, 2010; Lowe and Steemers, 2012; Nissen,
2013).
As recent strategic management studies show, strategic renewal can be viewed
as a complex and multidimensional process that encompasses both cognitive and
organisational capabilities. The ways organisations think and behave are tightly
connected and intertwined with these path-dependent capabilities, not only at the
managerial level, but in whole organisations (Agarwal and Helfat, 2009; see studies on
organisational renewal, e.g., Barr et al., 1992; Tripsas and Gavetti, 2000; Kaplan, 2008;
Eggers and Kaplan, 2009; Laamanen and Wallin, 2009; Tripsas, 2009). In this study, we
will focus on the functioning of the organisational capabilities by applying the DCV.
Since the DCV is still a young emerging research tradition, it has not yet been able to
create an established and unanimous theoretical basis. As many reviews on different
dynamic capability-related studies show, there are many different definitions, and
sometimes even contradictory views and understandings of the nature and purpose of
dynamic capabilities (e.g., Ambrosini and Bowman, 2009; Easterby-Smith et al., 2009;
Helfat and Peteraf, 2009; Barreto, 2010; Di Stefano et al., 2010; Peteraf et al., 2013;
Vogel and Güttel, 2013; Eriksson, 2014). Nevertheless, despite the variety of
orientations, it seems to be clear that there is quite a general agreement upon dynamic
capabilities being “of inherent strategic relevance to a firm” [Vogel and Güttel, (2013),
p.426] in enhancing firms’ and other organisations’ capacities to cope with rapidly
changing environments.
From the variety of definitions and interpretations of dynamic capabilities, we
will follow the seminal definition launched by Teece et al. (1990, 1997) and the
operationalised version by Teece (2007), which opens up the micro-foundations of the
 Dynamics of dynamic capabilities 137

DCV. According to this version, dynamic capabilities consist of three fundamental

categories, which are the sensing, seizing, and reconfiguring capacities of dynamic
capabilities. According to Vogel and Güttel’s (2013), bibliometric analysis of different
research traditions and trends within the DCV, the Teecean tradition used here represents
“the identity building core cluster” (p.439), whose focus is on “strategic learning and
change”. This learning perspective emphasises firms’ ability to modify and transform
their resource base as an important explainer of firms’ performance.
Our empirical analysis is based on a large survey at the Finnish Broadcasting
Company in the autumn of 2011. The survey was done when the implementation of a vast
strategic and organisational reform had just been started within the company. It is worth
keeping in mind that the survey was carried out for all the personnel. We will not explore
dynamic capabilities only at the managerial level, as very often is the case in the studies
applying the DCV. Here, we will look at the whole organisation, because we are tempted
to think that an organisation can be successful only when the changes and organisational
learning encompass the whole organisation and involve all the people in it.
One of our main research questions deals with the context-bound nature of the
capabilities. To put it more concretely: we are concerned with how the dynamic
capabilities relate to the organisational structure of our case-organisation, by analysing
whether the dynamic capabilities differ between organisational sub-units. In addition, we
will explore how the different types of dynamic capabilities relate to each other, by
analysing their interaction and mediation effects. Furthermore, we will study how the
dynamic capabilities add to the change performance within the company. It is worth
pointing out that, because we are concentrating on the internal change dynamics, we will
not explore how dynamic capabilities contribute to the competitive advantage of the
company analysed in comparison to other media companies. The change performance we
are concerned with is how the dynamic capabilities enhance the organisation’s capacity to
change (change performance), by which we mean the organisation’s capacity to learn and
cope with changes.
The paper is structured in the following way. Section 2 first introduces the theoretical
assumptions and concepts used in this paper, and then launches our conceptual model and
the hypotheses based on it. Section 3 presents the data collected, the variables used in the
analyses, and the results of the empirical analyses. Section 4 concludes the paper.

2 Theoretical foundations, main hypotheses, and conceptual model used

2.1 Dynamic capabilities in the context of public organisations

The DCV has been traditionally applied in the context of private companies, with the
research question of how a firm obtains and sustains its competitive advantage in the
changing business environment (Teece et al., 1997; Helfat et al., 2007; Teece, 2007,
2012). However, in recent years, the public context has also gradually raised interest
among scholars, and DCV-based studies done in public health care, public schools, and
so on seem to support the presumption that this approach is fruitful for advancing the
research on public organisations as well (e.g., Ridder et al., 2005; Pablo et al., 2007;
Klarner et al., 2008; Harvey et al., 2010; Piening, 2011, 2013). Reasons for this move can
be traced to the drastic changes in the operating environments of public organisations.
138 P. Maijanen and A. Jantunen

Hence, the capacity to renew the ways of thinking and doing is becoming as relevant for
public organisations as for private firms (Klein et al., 2010, 2013; Walshe et al., 2010;
Piening, 2013). This phenomenon also describes well the situation that public
broadcasting companies are going through at the moment.
The use of the DCV in the context of public organisations can also be justified by the
approach itself. The DCV is interested in the internal domain of the organisation,
meaning the organisational resources, routines, and capabilities that enable the pursuit of
better performance. These organisational elements exist in all kinds of organisations with
the same logic, whether private or public (Pablo et al., 2007; Klein et al., 2013; Piening,
2013). As Helfat et al. (2007, p.6) put it: “both types of organisations have resource bases
and both may face or initiate change”.
On the other hand, despite general organisational similarities, public organisations
and private enterprises do fundamentally differ from each other, and these differences
unavoidably affect their ways of coping with changes and renewing themselves.
Traditionally, the differences can be determined in terms of three dimensions: ownership,
funding, and control (Bozeman, 1987; Boyne, 2002; Piening, 2013). The level of
publicness tends to correlate with the organisation’s level of rigidity, as Piening (2013,
p.235) proposes: “the higher the degree of publicness, the less likely are public
organisations to develop and deploy dynamic capabilities”. One fundamental cause for
this lies in the external political control; the dependency on political stakeholders’
goal-setting, expectations, and support tends to reduce managers’ autonomy and their
willingness to commit to far-reaching strategic changes and innovative search activities
(Fernandez and Rainey, 2006; Salge, 2011; Piening, 2013). Nevertheless, due to the
frequent changes in the political scene, the public sector is “facing even more
environmental change than private sector firms” [Piening, (2011), p.131], and therefore
dynamic capabilities can be an important success factor for public organisations to meet
these pressures (Bryson et al., 2007; Pablo et al., 2007; Salge and Vera, 2013; Piening,
2013).
In light of the inherent path-dependent characteristics of public organisations, we will
argue that dynamic capabilities are needed to reduce organisational rigidity and to
enhance their capacity for learning and innovation in addressing the changing demands
and pressures arising from the operational environment. The few studies on dynamic
capabilities within the public sector indicate that the successful deployment of dynamic
capabilities in public organisations is based on incremental organisational learning (Zollo
and Winter, 2002), meaning learning by doing, experimenting, and predominantly
implementing the innovations of others rather than investing in making one’s own
innovations (e.g., Pablo et al., 2007; Piening, 2011, 2013; Salge and Vera, 2013).

2.2 The capacities of sensing, seizing, and reconfiguring

Dynamic capabilities enable organisations to respond to the need for strategic renewal
in the pursuit of long-term success in the changing environment. They facilitate
organisational learning and enable organisations to overcome the resource-gap between
the present and desired resource base (Teece et al., 1997; Helfat et al., 2007; Teece,
2012). Most of the many DCV definitions are based on the seminal definition of Teece
et al. (1997), which defines the dynamic capability as “the firm’s ability to integrate,
build, and reconfigure internal and external competencies to address rapidly changing
 Dynamics of dynamic capabilities 139

environments” (see e.g., Zollo and Winter, 2002; Helfat and Peteraf, 2003; Zahra et al.,
2006; Helfat et al., 2007; Easterby-Smith et al., 2009). In general, dynamic capabilities
can be defined as higher-order capabilities that reconfigure and transform the lower-level
operating routines and capabilities (Zollo and Winter, 2002; Winter, 2003; Ambrosini
et al., 2009; Helfat and Winter, 2011; Pawlou and El Sawy, 2011; Salvato and Rerup,
2011).
This study applies Teece’s (2007, p.1319) newer dynamic capabilities framework,
which distinguishes three fundamental capacities:

“For analytical purposes, dynamic capabilities can be disaggregated into

the capacity (1) to sense and shape opportunities and threats, (2) to
seize opportunities, and (3) to maintain competitiveness through enhancing,
combining, protecting, and, when necessary, reconfiguring the business
enterprise’s intangible and tangible assets.”

The sensing capacity (or capability) refers to the ability to sense and identify
opportunities and threats in the environment by applying “scanning, creation,
learning, and interpretive” activities [Teece, (2007), p.1322]. Organisations must be
constantly alert to weak signals as signs of future developments and opportunities (new
technologies, target segments, changing customer needs, new innovations, etc.). The
sensing capacity inherently encompasses the cognitive dimension of the dynamic
capabilities, and especially the dynamic managerial capabilities (Adner and Helfat, 2003;
Teece, 2012; Kor and Mesko, 2013; Helfat and Peteraf, 2014; see also Hodgkinson and
Healey, 2011), because the initiation of fundamental changes is mainly dependent on
managers’ capabilities to sense, pay attention to, and interpret new opportunities or
strategic options (Teece et al., 1997; Helfat et al., 2007; Teece, 2007; Kyläheiko et al.,
2008; Ambrosini and Bowman, 2009; Augier and Teece, 2009; Helfat and Peteraf, 2014).
The seizing capacity refers to the capability to seize the sensed opportunities, to take
action, and to invest in order to make the renewal process go forward towards the desired
goal. The seizing capacity is underpinned by such activities as making organisational
innovations, selecting business models and product architectures, and investing in
appropriate technologies. It also refers to the capacity to design such decision-making
procedures and organisational structures that enhance decision-making and combat the
cognitive and structural path-dependencies underlying the decision-making activities
(Teece, 2007, 2012; Helfat and Peteraf, 2009).
The reconfiguring capacity is underpinned by patterned activities that enable the
combining and recombining, renewing and orchestrating of tangible and intangible
resources – assets, routines, and capabilities – in order to sustain the organisation’s
evolutionary fitness (Helfat et al., 2007; Teece, 2007). It is also about learning new skills,
developing and adopting new processes and organisational structures, and effectively
applying knowledge management activities (e.g., knowledge sharing within the
organisation). (More about this, see Teece et al., 1997; Eisenhardt and Martin, 2000;
Zollo and Winter, 2002; Zahra et al., 2006; Helfat et al., 2007; Barreto, 2010; Basu, 2013;
Stadler et al., 2013).
It is worth noting that especially knowledge-related activities play an important role
in the organisational learning process – starting from the sensing and interpreting of new
pieces of knowledge and then assimilating them innovatively with the existing
knowledge base into new services, products, processes, and capabilities (= seizing and
reconfiguring). In this context the knowledge processing is closely related to an
140 P. Maijanen and A. Jantunen

organisation’s absorptive capacity (Cohen and Levinthal, 1990; Zahra and George, 2002;
Jantunen, 2005; Harvey et al., 2010; Salmi and Torkkeli, 2010).

2.3 Dynamic capabilities and organisational context

According to the DCV, the dynamic capabilities are developed and deployed
path-dependently, because the patterned activities that underpin these capabilities are
based on accumulated resources, routines, and experiences (Nelson and Winter, 1982;
Teece et al., 1997; Pierce et al., 2002; Wang and Ahmed, 2007; Ambrosini and Bowman,
2009). The collective memory and paths direct and constrain organisational learning by
limiting the possible strategic options for the future. Dynamic capabilities are not only
path-dependent and context-dependent, but also organisation-specific: the context within
which organisations utilise dynamic capabilities matters, and partly determines how well
they function and evolve further. As Helfat et al. (2007, p.7) state:

“Dynamic capabilities not only have generic attributes, but also become
tailored to the settings in which they function, including different industries,
technologies, functional areas, and organizations.”

In this paper, we will go a bit further, following the behaviouralist tradition of Cyert and
March (1963). We consider large organisations – as public organisations often are – to be
complex and multistructured, consisting of different sub-units with their own
path-dependencies and rigidities. These sub-units can be regarded as independent areas
with their own sub-goals, functions, assets, routines, and capabilities. Each sub-unit
forms its specific micro-context, upon which the dynamic capabilities are built when
sub-units are pursuing their desired goals. To sum up, it is not only the organisations that
differ in their dynamic capabilities. The organisations’ sub-units, with their own paths,
cultures, and functions, also differ in their capacity to sense the environment, to seize the
opportunities, and to reconfigure intangible and tangible organisational assets. This
brings us to our first hypothesis:

H1 The sensing, seizing, and reconfiguring capacities of the dynamic capabilities differ
between the sub-units.

2.4 Sensing, seizing, reconfiguring and performance

According to Teece (2007, p.1341), all three capacities of dynamic capabilities are
necessary in bringing success: “the enterprise will need sensing, seizing, and
transformational/reconfiguring capabilities to be simultaneously developed and applied
for it to build and maintain competitive advantage.” Each of them has to be taken into
consideration when measuring the effect of dynamic capabilities on performance (also
Barreto, 2010). The DCV relates the functioning of dynamic capabilities to organisational
learning (Teece et al., 1997; Pierce et al., 2002; Zollo and Winter, 2002). The patterned
activities underpinning dynamic capabilities aim at absorbing and integrating important
new knowledge innovatively with the existing knowledge and resource-base. In
another words, learning is the foundation of organisational change capacity (change
performance), which in turn adds to the overall performance. This brings us to our second
hypothesis:
 Dynamics of dynamic capabilities 141

H2 The sensing, seizing, and reconfiguring capacities of the dynamic capabilities relate
positively to the perceived change performance of the work unit.
In the model of Teece (2007), the sensing, seizing, and reconfiguring capacities are
connected to each other following a certain order and logic (Helfat and Peteraf, 2009).
Sensing gives the direction for strategic action. Once the strategic options have been
sensed, they have to be seized to make things really happen. This again can be done only
by renewing the operational-level capabilities, that is, the routines and resources
underlying them. This interrelatedness can be found directly or indirectly in several
definitions of the dynamic capabilities [e.g., Barreto, (2010), p.271].
In our view, the capacities can be seen as interconnected in pairs. The sensing and
seizing capacities are closely interrelated, because the strategic options have to be
exercised by means of new services, products, processes, business models, and so on to
be successful. On the other hand, the decision-making, seizing, is, as Barreto (2010,
p.271) notes, “relevant only if the organization also has the propensity to sense
opportunities and threats”. Importantly, good sensing mechanisms enhance the cognitive
capabilities of managers to overcome path-dependencies and biases in their decision-
making (Teece, 2007; Harvey et al., 2010). The sensing and seizing capacities seem to
support each other, and their interaction can be expected to have a positive cross-effect
on change performance.
The seizing and reconfiguring capacities can also be presumed to have a positive
synergy on (change) performance: to be able to transform the resource base the
organisation or the sub-unit must make the seizing decision first. According to Teece
(2007), effective decision-making practices (e.g., decentralised flat structures) enhance
reconfiguration activities.
The sensing and reconfiguring capacities can also be regarded as interconnected. In
Teece’s (2007) definition, the reconfiguring capacity is directly connected with
performance, and, consequently, through performance it is linked with the sensing
capacity. Failures have to be first sensed and interpreted in order to make corrective
decisions. One can also presume that alertness and active sensing direct and refocus
already existing reconfiguring activities to work in the right skill and knowledge areas
(Harvey et al., 2010; also Barreto, 2010). This brings us to the following hypotheses:
H3a The interaction of the sensing and seizing capacities of the dynamic capabilities
relates positively to the perceived change performance of the work unit.
H3b The interaction of the seizing and reconfiguring capacities of the dynamic
capabilities relates positively to the perceived change performance of the
work unit.
H3c The interaction of the sensing and reconfiguring capacities of the dynamic
capabilities relates positively to the perceived change performance of the
work unit.
Furthermore, we presume that the effect of the sensing capability on the perceived change
performance differs from the effect of the seizing and reconfiguring capabilities. We
think that the effect of the sensing capability on change performance is mediated by the
seizing and reconfiguring capabilities. This can be based on the role the sensing
capability has in the ‘chain’ of sensing, seizing, and reconfiguring capabilities (Teece,
2007; Helfat and Peteraf, 2009). They follow each other in a sequence, in which sensing
142 P. Maijanen and A. Jantunen

conditions the activities of the seizing capabilities, which in turn condition the
reconfiguration and recombination (orchestration) activities. Sensing brings in
information from outside, but nothing happens within the organisation unless the seizing
and reconfiguring capabilities turn sensed information into new strategic assets (Teece,
2007; Helfat and Peteraf, 2009; Barreto, 2010). In this action flow, sensing gives the fuel
to the other two capabilities, which in turn refine it into strategic assets. Hence, the
sensing capabilities mainly have an indirect impact through the seizing and reconfiguring
capabilities. This brings us to our final hypotheses:
H4a The effect of the sensing capability on the perceived performance of the work unit
is mediated by the seizing capability.
H4b The effect of the sensing capability on the perceived performance of the work unit
is mediated by the reconfiguring capability.

2.5 Conceptual model used

Figure 1 presents the conceptual model of our analysis, illustrating how the sensing,
seizing, and reconfiguring capabilities relate to the organisational context – its structure,
strategy and change performance – during the strategic change process. Due to the
context-dependencies, the dynamic capabilities can be expected to differ between the
sub-units. In addition, the sensing, seizing, and reconfiguring capabilities are expected
to affect change performance positively. Dynamic capabilities are assumed to be
interrelated with each other, and the interaction of the capabilities can be expected to
have an extra synergy effect on change performance. Finally, we assume that the sensing
capabilities’ impact on performance is mediated through the seizing and reconfiguring
capabilities.

Figure 1 The model illustrating dynamic capabilities in relation to the organisational context
Perceived change performance
Strategy and strategic actions

Sub-unit A

Sub-unit B Sensing Seizing Recon-

figuring

Sub-unit C

Sub-unit D

Dynamic capabilities
 Dynamics of dynamic capabilities 143

3 Empirical analysis and main results

3.1 Data collection

The empirical data of our analysis is based on a quantitative survey carried out for all the
personnel at the Finnish Broadcasting Company (n = 3,496) using the Webropol 2
software. The response rate was 39.4% (1,397 employees answered).
The survey was conducted in October–November 2011 – ten months after the
implementation of a strategic reform started in practice. With the new strategy and
organisational reform, the company sought to sustain competitiveness in the domain of
digital content production, and to achieve more flexibility and efficiency. One of the
main effects of the reform was the establishment of six sub-units with their underlying
functions and tasks: the media unit (the general planning, coordination, and profiling of
the channels on all platforms); three content units: current affairs and news, creative
content (content in the domains of culture, entertainment, drama, etc.), and Swedish Yle
(all Swedish language content); the operations unit (responsible for larger program
productions and technological infrastructure); and the joint operations unit (a matrix unit
for coordination of the company’s own resources, e.g. HR, financial affairs, strategy).
In the survey, respondents were asked to evaluate the sensing, seizing, and
reconfiguring capacities and the change performance of their own work units. They were
also asked to evaluate their attitudes towards change, work motivations, threats, and so
on. Demographic variables such as age, gender, work experience, organisational level,
and sub-unit membership were applied. The quantitative analysis was made using
multivariate analysis methods, using SAS EG 4.2.

3.2 Variables of the analysis

In this study, the sub-units were regarded as aggregates of the work units striving for the
sub-unit-level targets and goals. Hence, the dynamic capabilities and the change
performance measured on the level of work units can be analysed in the context of the
sub-units. The sensing, seizing, and reconfiguring capabilities were measured by the
respondents’ evaluations of the patterned activities underlying the different dynamic
capabilities in the work unit. The evaluations were done on Likert scale 1–5 (1 = totally
disagree; 5 = totally agree). As shown in Table 1, the items measuring the variables
sensing, seizing and reconfiguring are related to activities that enhance organisational
learning and, consequently, change in terms of sensing the environment, making rapid
decisions, and being able to share knowledge and learn new things.
The effect of the dynamic capabilities on the learning capacity is measured by means
of the respondents’ evaluations of how well their work unit has coped with the recent
reforms (the variable perceived change performance). The evaluation was done on the
Finnish school grade scale from 4 to 10 (with 4 meaning ‘fail’ and 10 meaning
‘excellent’). The interactions between sensing and seizing, seizing and reconfiguring, and
reconfiguring and sensing were constructed by multiplying the standardised values of the
variables (sensing, seizing, and reconfiguring). The standardisation was applied to avoid
muticollinearity in the regression analysis. The six sub-units – media, news and current
affairs, creative content, Swedish Yle, operations, joint operations – were used as
demographic variables in our analysis.
144 P. Maijanen and A. Jantunen

Table 1 The variables of the analysis

Variable Construction of the variable Measuring items

Sensing Composite measure of four
items measuring the sensing
capability in the work unit
(Likert scale 1–5; 1 = totally
disagree; 5 = totally agree)
Seizing Composite measure of three
items measuring the seizing
capability in the work unit
(Likert scale 1–5; 1 = totally
disagree; 5 = totally agree)
Reconfiguring Composite measure of
three items measuring the
reconfiguring capability in the
work unit (Likert scale 1–5;
1 = totally disagree;
5 = totally agree)
Perceived change One item measuring the change Evaluate your work unit’s performance,
performance of using the the Finnish school considering the recent reforms, using the
the work unit grading scale of 4 to 10 Finnish school grading scale of 4 to 10.
(with 4 meaning ‘fail’ and
10 meaning ‘excellent’)
1 In my work unit, we actively scan other
media.
2 In my work unit, we do not respond to
customer feedback enough (reversed
scale).
3 We are actively in contact with different
stakeholders.
4 In my work unit, we actively follow
changes in audience and customer
behavior and needs.
1 In my work unit, the customer feedback
and audience research are taken into
account in the development work.
2 In my work unit, the changes agreed
upon are carried out and not left
unfinished.
3 In my work unit, we are capable of
making fast decisions and changes in
work practices when needed.
1 Sharing knowledge and learning new
things is a typical way of working in my
work unit.
2 In my work unit, the professional skills
and expertise of personnel are developed
through specifically targeted training.
3 My work is slow to adopt news skills
and working methods (reversed scale).

Table 2 shows Cronbach’s alpha coefficients of the sum variables. The coefficients
indicate them to be consistent (Nunnally, 1978).
Table 2 Cronbach’s alpha of the sum variables

Sum variable Cronbach’s alpha

Sensing 0.68
Seizing 0.70
Reconfiguring 0.69

Table 3 shows the descriptive statistics of the variables of the analysis. Pearson’s
correlation coefficients of the sum variables are presented in Table 4.
 Dynamics of dynamic capabilities 145

Table 3 Descriptive statistics of the variables

Variable N Mean Std. dev.

Sensing 1,365 3.361 0.776
Seizing 1,364 3.345 0.870
Reconfiguring 1,368 3.213 0.884
Perceived change performance of work unit 1,364 7.752 1.217

Table 4 Pearson’s correlation coefficients of the variables

Perceived
Sensing Seizing Reconfiguring
change perform.
Sensing 1.000
Seizing 0.583*** 1.000
Reconfiguring 0.424*** 0.647*** 1.000
Perceived change 0.367*** 0.551*** 0.496*** 1.000
perform. of work unit
Note: ***<.01

3.3 Results of analysis

Table 5 shows the results of the comparison of the means of the sensing, seizing, and
reconfiguring capabilities between the sub-units. ANOVA tests are conducted to test
Hypothesis 1.
Table 5 Comparison of means, dependent variable: dynamic capabilities
(sensing, seizing, reconfiguring)

One-way Anova DF F value

Dependent variable: sensing
Independent variable: sub-unit 5 7.23***
Dependent variable: seizing
Independent variable: sub-unit 5 8.29***
Dependent variable: reconfiguring
Independent variable: sub-unit 5 11.43***
Note: ***< .01
According to the tests, there are significant differences between sub-units in sensing,
seizing, and reconfiguring capacities (at the level of 1%). Hereby, we may conclude that
these findings support the hypothesis H1. According to the results, the mean values range
from 3.0 to 3.6. The media unit does well or pretty well in all capacities; it differs from
the other units with the highest (3.6) score in both the sensing and seizing capability. The
joint operations unit comes right after and does fairly well in all capabilities. Swedish Yle
takes the middle level and the other three units – news and current affairs, creative
content, and operations – stay at the lowest level. The news and current affairs and
creative content units significantly differentiate from other units with their lowest scores
in the reconfiguring capability.
 146

Table 6

Model 1 Model 2 Model 3 Model 4 Model 5

Variable Parameter Parameter Parameter Parameter Parameter
t value t value t value t value t value
estimate estimate estimate estimate estimate
Intercept 7.788 128.54*** 4.831 35.67*** 4.887 35.37*** 4.885 35.48*** 4.865 35.69***
Media unit 0.083 0.81 –0.245 –2.91*** –0.234 –2.78*** –0.234 –2.78*** –0.236 –2.81***
Creative content unit –0.526 –5.23*** –0.513 –6.27*** –0.503 –6.15*** –0.505 –6.17*** –0.503 –6.14***
Swedish Yle 0.009 0.08 –0.190 –1.99* –0.188 –1.98** –0.187 –1.96** –0.191 –2.00**
Operations unit 0.060 0.64 –0.019 –0.25 –0.022 –0.28 –0.021 –0.28 –0.021 –0.27
Joint operations unit 0.298 2.27** 0.005 0.05 0.014 0.13 0.025 0.23 0.019 0.17
Sensing 0.110 2.58*** 0.105 2.44** 0.115 2.69*** 0.106 2.48**
P. Maijanen and A. Jantunen

Seizing 0.502 11.21*** 0.492 10.92*** 0.491 10.88*** 0.504 11.25***

Reconfiguring 0.317 7.91*** 0.324 8.06*** 0.316 7.89*** 0.315 7.87***
Stnd Sensing * –0.046 –1.98**
Stnd Seizing
Stnd Seizing * –0.050 –2.09**
Stnd Reconfiguring
perceived change performance of the work unit

Stnd Reconfiguring * –0.049 –2.04**

Stnd Sensing
Fit statistics
DF F value R2 R2 adj.
N = 1,342
Model 1 5 9.99*** 0.036 0.032
Model 2 3 228.99*** 0.364 0.360
Model 3 1 3.94** 0.366 0.362
Model 4 1 4.36** 0.366 0.362
Model 5 1 4.16** 0.366 0.362
Notes: *< 0, 1; ** < .05; ***< .01
Parameter estimates of the hierarchical linear regression, dependent variable:
 Dynamics of dynamic capabilities 147

Table 6 shows the results of the hierarchical linear regression, which was conducted to
test hypotheses 2, 3a, 3b, and 3c. The variables were included in blocks starting from
model 1 and ending in model 5. In model 1, only the dummy variables of the sub-units
were included. The news and current affairs unit was set as the reference group. In
model 2, the sensing, seizing, and reconfiguring capabilities are added to test H2. Each of
the models 3, 4, and 5 includes only one interaction of the capacities at a time, testing
H3a, H3b, and H3c. Finally, Table 6 shows the fit values for each step concerning the
significance of the added variables. Models 1 and 2 are significant at a 1% level, and
models 3, 4, and 5 at a 5% level.
The parameter estimates of model 1 indicate that there are some significant
differences between sub-units in relation to the perceived change performance of the
work unit. In comparison to news and current affairs, the creative content unit gets the
lowest and joint operations gets the highest coefficient value. It is worth noting that
model 1 – containing only the dummy variables – explains only 3% of the variation in the
perceived change performance of the work units.
As model 2 indicates, the inclusion of the dynamic capabilities into the model
increases the R-square notably, now explaining 36% of the variation in the perceived
change performance. All the parameter estimates are positive and seizing is the strongest
in relation to the perceived change performance (at a 1% risk level). The reconfiguring
capability also relates significantly to the perceived performance (p < 0.01). The sensing
capability relates more moderately to the perceived performance, with the smallest
positive estimate value (at a 1% risk level). Hence, our hypothesis H2 gets supported. It
gets strongly supported in the case of the seizing and reconfiguring capacities, and
moderately supported in the case of the sensing capability.
As models 3, 4, and 5 indicate, all the interactions of capacities get – surprisingly –
negative and very small coefficient values in relation to the perceived change
performance of the work unit. The interactions do not increase the R-square from the
level of model 2. Hence, in our analysis, hypotheses 3a, 3b, and 3c are not supported.
Instead of the expected positive, synergistic interaction effects, the empirical findings
show that all interaction effects between sensing, seizing, and reconfiguring on change
performance are negative, meaning dampening effects. For example, taking alone both
sensing and seizing positively affect change performance, but together they improve the
change performance less than what would be the sum of the effects of both individual
capacities.
To test hypotheses 4a and 4b – mediating effects of the seizing and reconfiguring
capabilities – we follow Baron and Kenny’s (1986) mediation model (Kuittinen et al.,
2013). The test goes through a three-step sequence of linear regression models, and it will
be applied separately for both mediating capabilities (seizing and reconfiguring). Figure 2
illustrates the elements of the mediation model applied in the context of the sensing,
seizing, and reconfiguring capacities of dynamic capabilities.
We conduct the following linear regression models when testing the mediation
effects:
Step 1 A linear regression model to confirm that the independent variable (sensing)
significantly explains the variations of the mediator (seizing or reconfiguring).
Step 2 A linear regression model to confirm that the independent variable (sensing) is a
significant predictor of the dependent variable (perceived change performance).
148 P. Maijanen and A. Jantunen

Step 3 A linear regression on both the mediator (seizing or reconfiguring) and

the independent variable (sensing) to confirm, firstly, that the mediator
significantly predicts the independent variable (perceived change performance)
and, secondly, that the effect of the independent variable (sensing) is now
smaller than its original effect in Step 2.

Figure 2 The mediation model (Baron and Kenny, 1986) in the context of dynamic capabilities

Mediator:
seizing

Independent: Dependent:
sensing perceived
change
performance

Mediator:
reconfiguring

Tables 7 and 8 show the results of the linear regression models conducted to test
hypotheses 4a and 4b. The dummy variables of sub-units are included as control
variables, and the news and current affairs unit is the reference group.
Table 7 Regression analysis results: effect of sensing on the perceived change performance;
mediating variable: seizing

Step 2: Step 3:
Step 1:
Dependent: perceived change perceived change
seizing
performance performance
Independent B t B ti B ti
Intercept 1.127 12.50*** 5.875 36.77*** 5.077 34.26***
Media 0.173 2.87*** –0.078 –0.82 –0.195 –2.28**
Creative contents –0.037 –0.63 –0.547 –5.37*** –0.510 –5.51***
Swedish Yle 0.108 1.57 –0.040 –0.37 –0.112 –1.23
Operations 0.053 0.95 0.123 1.49 0.080 1.05
Joint operations 0.178 2.30** 0.214 1.99** 0.091 0.95
Sensing 0.642 25.73*** 0.577 12.72*** 0.133 2.52**
Seizing 0.670 15.43***
Model fit F R-sq F R-sq F R-sq
120.24*** 0.348 46.31*** 0.171 95.74*** 0.334
Notes: *< .1; **< .05; ***< .01
i
Heteroskedasticity-consistent
 Dynamics of dynamic capabilities 149

Table 7 represents the results of the three steps of regressions that test the hypothesised
mediating effect of seizing on sensing’s impact upon the perceived change performance
of the work unit. All the regression models are statistically significant. As we can see, the
condition of Step 1 is fulfilled, as the independent variable of sensing has a significant
positive effect on the mediator of seizing. Furthermore, sensing has a significant positive
effect on the perceived change performance, which is the condition of Step 2 (B = 0.577).
In Step 3, the mediating variable of seizing has the required significant positive effect on
the perceived change performance, and the impact of sensing notably reduces from Step 2
to Step 3 (B = 0.577 → B = 0.133). Hence, hypothesis 4a is supported: the effect of the
sensing capability on the perceived change performance of the work unit is mediated by
the seizing capability.

Table 8 Regression analysis results: effect of sensing on the perceived change performance;
mediating variable: reconfiguring

Step 2: Step 3:
Step 1:
Dependent: perceived change perceived change
reconfiguring
performance performance
Independent B t B ti B ti
Intercept 1.424 14.11*** 5.875 41.25*** 5.045 33.86***
Media 0.264 3.90*** –0.078 –0.82 –0.223 –2.62***
Creative contents 0.050 0.76 –0.547 –5.88*** –0.542 –5.83***
Swedish Yle 0.309 4.03*** –0.040 –0.36 –0.206 –2.12**
Operations 0.352 5.72*** 0.123 1.42 –0.074 –0.93
Joint operations 0.381 4.40*** 0.214 1.76* 0.004 0.04
Sensing 0.477 17.07*** 0.577 14.65*** 0.320 6.61***
Reconfiguring 0.558 12.97***
Model fit F R-sq F R-sq F R-sq
59.92*** 0.211 46.31*** 0.171 83.23*** 0.304
Notes: *< .1; **< .05; ***< .01
i
Heteroskedasticity-consistent

Table 8 shows the results of the three steps of regressions concerning the reconfiguring
capability as a mediator. Here, too, all the regression models are significant. In Step 1, the
independent variable of sensing has a positive significant effect on reconfiguring, thus
fulfilling the first condition. Step 2 repeats the result of the preceding test: sensing has a
significant positive effect on the perceived performance. In Step 3, reconfiguring has a
positive significant effect on the perceived performance, and the impact of sensing is
smaller than in Step 2 (B = 0.577 → B = 0.320). Hence, hypothesis 4b is supported: the
effect of the sensing capability on the perceived change performance of the work unit is
mediated by the reconfiguring capability. It is worth noting that the mediation effect of
the reconfiguring capability is not so strong as that of the seizing capability.
150 P. Maijanen and A. Jantunen

4 Discussion and conclusions

This study analyses the role of dynamic capabilities within the Finnish Broadcasting
Company in the early phase of its strategic renewal process. The study contributes to the
emerging research tradition of exploring dynamic capabilities in the public sector. The
Finnish Broadcasting Company represents today’s public organisation, being owned,
controlled, and funded publicly, but being at the same time under pressure to cope and
succeed with new technologies and challenges of the fast-changing and more competitive
media environment.
In our study, we operationalised the definition of Teece (2007), which differentiates
dynamic capabilities into three categories: sensing, seizing, and reconfiguring capacities.
The study focuses on the following questions:
1 how the sensing, seizing, and reconfiguring capabilities relate to the organisational
context, consisting of different sub-units
2 how the dynamic capabilities relate to the change performance
3 how the different dynamic capabilities relate to each other.
Our results indicate the context-bound and path-dependent nature of the dynamic
capabilities. The contexts of the sub-units do affect the way the sensing, seizing, and
reconfiguring capabilities are developed and deployed. It is not surprising that, according
to our survey, the media unit does well in all the three capacities. It is strategically an
important unit, being responsible for planning and profiling the channels and platforms.
Hence, it has to be good in sensing, making decisions, and taking actions. The joint
operations unit also does fairly well. This could be related to the strategically important
task of coordinating internal resources and having all the personnel as its customers that
makes sensing easier. Interestingly, the creative content unit gets the lowest scores
throughout the analysis. One could look for the explanation in the change process itself
and in the past experiences of the unit. By the time of the survey, the creative content unit
was less coherent than, for instance, the more established and traditional Swedish Yle and
the news and current affairs unit. This issue would be interesting to study in more detail
by utilising qualitative research methods and on a longitudinal basis.
The context-bound nature of dynamic capabilities is manifested in how the
capabilities enhance the change performance. Throughout the analyses, the results differ
between the sub-units of the case-organisation. This is logical, because the change
performance is based on the deployment of dynamic capabilities, which in turn are based
on the context-specific assets and processes.
The results of our empirical analyses highlight some interesting features of the nature
and relationship of the sensing, seizing, and reconfiguring capabilities. Firstly, the seizing
capability seems to be the most efficient in promoting change performance. The strong
effect of seizing makes sense, because its role is very concrete in the change process:
without investment decisions, nothing happens in practice (no matter how much sensing
there is going on). Secondly, the sensing capability turns out to have an indirect effect on
the performance mediated by the two other capabilities. The sensing activities link the
Finnish Broadcasting Company to the world outside it and provide information upon
which the decision-making and asset reconfiguration can work. This result confirms the
chain model idea launched by Teece (2007), in which sensing comes first and the other
capabilities come next, being more directly related to change performance.
 Dynamics of dynamic capabilities 151

The powerful role of the seizing activities can be recognised as well, when looking at
their mediator role. According to our results, the effect of sensing on change performance
is more strongly mediated by seizing than by the reconfiguring capability. This is quite
logical: the seizing activities interpret the sensed information for the organisation and for
further use when reconfiguring the asset base. Hence, most of the sensed information is
processed by the seizing activities before the reconfiguration begins. These results clarify
the role of the sensing capability in relation to the two other capabilities. The
interpretation of new information is fundamental for change, but it does not make any
difference by itself. It has to be integrated into new assets and routines, and this
integration process takes place only by means of seizing and reconfiguring capabilities.
In addition, we got unexpected results concerning the interaction effects between the
three types of dynamic capabilities. In our case organisation, the negative but very small
effect of the interactions indicates that the sensing, seizing, and reconfiguring capabilities
do not give any interrelated synergy boost to change performance. This clearly should be
explored more and in other contexts. Even if the internal logic of Teece’s model seems to
give support to the synergy idea of interaction effects between different capabilities, the
so-called chain model (Helfat and Peteraf, 2009), on the other hand, suggests that the
sensing, seizing, and reconfiguring capabilities in fact form a process – a course of
actions – in which they follow each other in a timely fashion and do not occur
simultaneously. The signals from the external environment have to be first interpreted
before they can be seized, and they must be seized before new knowledge can be
incorporated into new routines and assets. Hence, sensing, seizing, and reconfiguring
cannot overlap, and therefore one cannot necessarily anticipate synergy effects.
To sum up, our study has given some insights into the internal dynamics of the
organisational renewal process by exploring the functioning of the dynamic capabilities
in different sub-units within an organisation. The study shows how the capabilities are
context-bound and how different capabilities depend on each other but, at the same time,
independently fulfil different tasks in the change process.
Finally, our study has shed some new light on the increasing role of dynamic
capabilities in the public context. Based on our findings, one can conclude that dynamic
capabilities do exist, act, and affect the organisational change performance in public
organisations as well. As the few studies on dynamic capabilities in the public sector
show, change processes are there, but they tend to be more moderate than in the private
sector, supporting more organisational learning than radical innovations (Klein et al.,
2013; Piening, 2013). In addition, the extent to which the organisational structure and the
special roles of sub-units matter may also be quite relevant in the public context. Here,
we can refer to the ideas of Cyert and March (1963) concerning sub-units, sub-goals, and
organisational slack. Klein et al. (2011, p.5) regard the public context as favourable for
the existence of divergent sub-goal pursuits, in which “the absence of a clear and binding
bottom line, (such as profitability), is likely to favor sub-goal pursuit more than in case of
private firms”. This is an important lesson for managers when carrying out organisational
changes in public sector organisations. It is also important to pay attention to sensing,
seizing, and reconfiguring mechanisms and processes underlying the three types of
dynamic capabilities. As Teece (2007) points out, they all have to be active and present
during the change process, because learning depends on how well an organisation
manages to deploy its capabilities. Harvey et al. (2010) wisely recommend that public
organisations should invest in absorptive capacity in order to cut down path-dependencies
and enhance learning. By investing in knowledge-processing mechanisms organisations
152 P. Maijanen and A. Jantunen

would “become aware of what additional knowledge it needs and of the ways through
which it can be accessed and utilized” [Harvey et al., (2010), p.87].
The main limitation of our study is that it is a cross-sectional study conducted in one
organisation. Clearly, a longitudinal study would provide more understanding of how the
relationships between the capabilities evolve as the change goes further. Our next task is
to go into the longitudinal direction, which helps to study processual impacts in more
detail. In addition, the change performance used as an explanandum is based on
subjective evaluations of the personnel. In our view, however, this is only a minor
drawback, because we focused on internal organisational dynamics, not on competitive
advantage compared to other media companies. Despite the limitations, our study has
opened up some interesting new questions for further studies, such as whether the
relationships between sensing, seizing, and reconfiguring capabilities should be studied
more in the context of different sub-units with different internal logic. In addition, the
mediation effect between different capabilities would be worth studying in other
organisation types and contexts as well.

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