routine work isidro urquiola ralero[1]

8/8/2019 Routine Work Isidro Urquiola Ralero[1]

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Internationales Institut fr Management (IIM)

SEMINAR STRATEGIC AND TECHNOLOGICAL CAPABILITIES

The concept of routines:

Main assumptions

by

ISIDRO URQUIOLA RALERO

28 January 2008


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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.............................................................................. 52.1.2 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.............................................................................................187 DYNAMIC CAPABILITIES .......................................................................................20

8 CONCLUSION ............................................................................................................22

9 REFERENCES.............................................................................................................23


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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 thatthese 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 itwith 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 thestrategies 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.


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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 ofview, 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 determinedby the period-by-period augmentation or diminution of the firms 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 sustainablecompetitive advantage. (Schreygg 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.


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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 SCHUMPETER

1

THEORYHe 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 theeconomy 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 generatedfrom within itself.

Deepening us a little in Witts (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 andgrow.

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

1Joseph 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 UniPress, 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.


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heritable in the sense that tomorrows organisms generated from todays 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 particularaction.

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 mans 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 ofother 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)

3Behaviorism 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 feelingcan and should be regarded as behaviors.(Skinner, B.F."The operational analysis of psychological terms, 1984, quoted from

http://en.wikipedia.org/wiki/Behaviorism)


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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 chooseas 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 firms actions. In their view, the questions of the firms objective, in that

sense, can never be resolved because it would involve too much time-consumingbargaining over too many hypothetical choices. Instead of that, the firm persists in a

state of quasi-resolution of conflict. The firms 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 relevantto 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).


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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 entirelyfrom 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 formof storage of the organizations 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 organizationmembers 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. Insuch a context- for example, the initial operation of a new plant- the eventual


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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 organizations routine, considered as an abstract way of doing things, is anorder that can persist only if it is imposed on a continually changing set of specific

resources. Some part of this task of imposing the routines 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 selectionproblems 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 lookto 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


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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 arethemselves 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)


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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 istriggered 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 organizations 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)


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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 isroutine (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 tomention: 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 RECURRENCEWinter (1990), mentioned thatRecurrence is a key characteristic of routines (M. C.


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 copieseven 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 dcembre,

20064)

4http://www.ish-

lyon.cnrs.fr/labo/walras/Objets/New/Colloqueinst/06Becker_Lazaric.pdf


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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 multipleactors 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 routinesare 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 ANDSPECIFICITY

Routines are embedded in an organization and its structures, and are specific to thecontext (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


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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 certainconstellation 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,


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 localbest 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,


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)


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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.



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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 theprerequisites 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 Schumpeters circular flow at the level of theindividual 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 difficultieswith 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


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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 effortsthat they make on the daily work.


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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. (Schreygg 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 ordoing 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). (Schreygg and Kliesch-Eberl, How dynamic can organizational capabilities

be? 2007:915)

Capabilities represent a reliable pattern: a problem-solving architecture composed ofa 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. (Schreygg 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 relevantfor 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. . (Schreygg 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 companys current and future decision

capabilities are imprinted by past decisions and their underlying patterns (Cowan and

Gunby, 1996, quoted from Schreygg 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.


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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. . (Schreygg and

Kliesch-Eberl, How dynamic can organizational capabilities be? 2007:916)

Hannan and Freeman (1984: 153, quoted from Schreygg and Kliesch-Eberl, How

dynamic can organizational capabilities be? 2007:915) stress the importance of theunusual 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. (Ghemawatand 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

organizations 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. (Schreygg and Kliesch-Eberl, How dynamic can

organizational capabilities be? 2007:918-919)


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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 Schreygg 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 adaptabilityat 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 linkingand 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 unforeseeableenvironmental demands (Eisenhardt, 2002). (Schreygg 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 Schreygg 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


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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 staticcomponent. 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 firms asset structure accomplished through alert

surveillance of the environment for discontinuities and subsequent radical changes.

(Schreygg 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 andstable pattern of collective activity through which the organization systematically

generates and modifies its operating routines in pursuit of improved effectiveness.

(Schreygg and Kliesch-Eberl, How dynamic can organizational capabilities be? 2007:

923)


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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, andthat 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 DynamicCapabilities 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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routine work isidro urquiola ralero[1]

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