Management Decision: Emerald Article: Core Competency Beyond Identification: Presentation of A Model

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Management Decision

Emerald Article: Core competency beyond identification: presentation of a


model
Urban Ljungquist

Article information:
To cite this document: Urban Ljungquist, (2007),"Core competency beyond identification: presentation of a model", Management
Decision, Vol. 45 Iss: 3 pp. 393 - 402
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http://dx.doi.org/10.1108/00251740710745034
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SECTION 3. COMPETENCIES, Core competency


CAPABILITIES AND RESOURCES beyond
identification
Core competency beyond
identification: presentation of a 393
model
Urban Ljungquist
School of Management and Economics, Växjö University, Växjö, Sweden

Abstract
Purpose – The purpose of this paper is to outline a model that is conceptually and empirically
applicable by practitioners in contexts extending beyond mere core competence identification.
Design/methodology/approach – This paper presents a conceptual review of a model.
Findings – This paper demonstrates that the associated concepts (competence, capability, and
resources) have characteristics that differ both conceptually and empirically. The findings also
indicate that competencies are central to core competence matters; it is possible to distinguish them
analytically by three criteria. Furthermore, the notions of hierarchy suggested in previous research
could not be verified which implies that the associated concepts all reside at the same hierarchy level.
Research limitations/implications – The findings advance core competence theories that better
serve the needs of practicing managers and consultants, by initiating a specific research agenda in
conceptual and empirical reviews and discussions. By proposing a model, the study provides a point of
departure for core competency research that goes beyond matters of identification.
Practical implications – The dissimilar characteristics of the associated concepts offer great
opportunities to core competency management, by means of the different influences they have on core
competencies. Their influence makes organizational change and rejuvenation not only
comprehensible, but also manageable. This is of particular importance to organizations that need
ongoing renewal of core competencies, for example, when facing dynamic business environments.
Competence improvements manage and change core competencies; capability supports reinforce and
create structure before, during, and after a change process; resource utilizations are operative, and
need daily attention.
Originality/value – The paper initiates a new research agenda for core competency matters by
acknowledging specific features of the concepts associated with core competence. This makes a
significant contribution to the existing literature in terms of practical and scholarly applicability.
Keywords Competences, Change management, Corporate strategy, Organizational structures
Paper type Research paper

Introduction
The concept of core competence, as fundamental to organizational renewal and as a
driving force behind strategic change, interests both managers and scholars. It is a
complex and challenging concept: it is difficult to specify theoretically, to identify Management Decision
Vol. 45 No. 3, 2007
empirically as a phenomenon, and to apply in practice. Scholars have recently pp. 393-402
recognized these problems in general conceptual discussions (Hafsi and Thomas, 2005) q Emerald Group Publishing Limited
0025-1747
and in core competence-specific empirical research (Wang et al., 2004). DOI 10.1108/00251740710745034
MD Identification is arguably the starting point of all core competence research (Clark,
45,3 2000) and is the matter on which most previous research has focused (e.g. Eden and
Ackermann, 2000; Javidan, 1998). The process of identifying core competencies usually
entails having employees identify core competencies by scanning and assessing
company-critical resources, capabilities, and competencies (Prahalad and Hamel, 1990)
– three factors commonly referred to as “associated concepts”. In the identification
394 process these concepts often become conceptually and empirically merged, something
that occurs in strategic management research too, when these associated concepts are
defined interchangeably. For example, capabilities and competencies are defined
interchangeably by Spanos and Prastacos (2004), resources and capabilities by Peteraf
and Bergen (2003) and Ray et al. (2004), and skill, competence, and capability by Hamel
and Prahalad (1994). Other scholars, however, have more usefully distinguished these
associated concepts (Branzei and Thornhill, 2006; Makadok, 2001; Helfat and Peteraf,
2003; Amit and Shoemaker, 1993; Savory, 2006; Ljungquist, 2008). Although merging
the associated concepts is occasionally justifiable, it normally makes sense to
distinguish them by their characteristics. In fact, each concept is acknowledged to be
substantial enough to have its own major research stream in the strategic management
field, namely, the resource-based, competence-based, and dynamic capability-based
streams (Barney, 1991; Sanchez, 2004; Teece et al., 1997). Although neglecting the
associated concepts’ distinguishing characteristics may occasionally be useful in
complex identification processes, for more advanced core competence matters doing so
is unsatisfactory. The very diversity of the concepts enhances our understanding of
core competence, and is relevant to research issues such as core competence
management, a matter going far beyond mere identification. In this paper, we
distinguish the associated concepts as clearly as possible using conceptual definitions
and, in practical contexts, empirical definitions.
Javidan (1998) has conceptually distinguished the associated concepts in a
“competencies hierarchy”. This represents a combination of two types of hierarchy: a
cumulative one, since the concepts are described as building on each other, and a
qualitative one, since higher-order concepts are assumed to be of greater organizational
value than lower-order concepts are. The hierarchy starts with resources at the bottom;
next come capabilities, which build on resources, and then competencies, which build
on both resources and capabilities (Javidan, 1998). Finally, core competencies reside on
the highest level; they are of the greatest value to organizations, but are the most
difficult to achieve. This hierarchy notion seems reasonable, although the definitions of
the associated concepts are not explicitly presented. In fact, the hierarchy Javidan
suggests seems to be valid only for structuring the concepts, for revealing that they
have different organizational applications. In other words, the concepts’ differing
characteristics as such are neither acknowledged in the hierarchy nor applied in
practical matters.
In this paper, the suggested hierarchy is scrutinized by acknowledging the
differences between the concepts’ characteristics. The starting point for doing this is to
differentiate the associated concepts, and to examine the characteristics and definitions
by scrutinizing the identification of core competence (on which most existing research
has focused) and exploring the extent to which the literature supports the hierarchy
notion. This paper thus outlines a core competence model, conceptually and
empirically applicable by practitioners to more than mere identification matters.
In the following, the associated concepts are first reviewed separately and their Core competency
conceptual bases scrutinized. This leads to proposed methods for distinguishing beyond
between conceptual and empirical definitions, and to an assessment of their places in
the hierarchy. The findings are summarized in a table and discussed in both individual identification
and merged analytical terms.

395
Conceptual fundamentals
The core competence notion is evident in several major research streams in the
strategic management field. Such streams include the resource- (Penrose, 1959;
Wernerfelt, 1984), competence- (Sanchez et al., 1996), learning- (Senge, 1990),
knowledge- (Grant, 1996), and dynamic capability-based views (Eisenhardt and
Martin, 2000; Teece et al., 1997). Because of its diverse origins and applications,
contemporary core competence issues are impossible to classify according to any one
particular theory. Classification is further complicated by the fact that the “associated
concepts” all have their own origins in the aforementioned “views”. For example,
resources are the major focus of the resource-based view, in assessing organizations’
resources according to the valuable, rare, inimitable, and organizable categories
(Barney, 1991). The knowledge-based view takes a different approach (Grant, 1996): a
resource is defined as an input to the value process, and competencies and creating
organizational knowledge are major focuses. The competence-based view, finally, also
acknowledges resources, but mainly as deployable assets, governed by competencies
(Sanchez et al., 1996).

Core competence
One of the best-known strategic management concepts is undoubtedly that of “core
competence”. The concept was introduced in the early 1990s and is defined as “the
collective learning in the organization, especially how to coordinate diverse production
skills and integrate multiple streams of technologies” (Prahalad and Hamel, 1990, p. 82).
Later, the definition was expanded to include “a bundle of skills and technology that
enable a company to provide benefit to customers” (Hamel and Prahalad, 1994, p. 199).
Though its basis is fairly clear, the concept is defined in vague terms, so the concept is
difficult to apply in practical situations. Even so, it is crucial to keep referring to the
concept’s premises when studying core competence, otherwise we will end up studying
something else. Three criteria that distinguish a core competence from a competence
are as follows (Prahalad and Hamel, 1990; Hamel and Prahalad, 1994):
(1) A core competence must contribute significantly to customer benefit from a
product.
(2) A core competence should be competitively unique, and as such, must be
difficult for competitors to imitate.
(3) A core competence should provide potential access to a wide variety of markets.

Accordingly, in this paper, a competence that satisfies the above three criteria is taken
as a core competence. The criteria imply a hierarchy of quality between a core
competence and a competence; the former is more advanced, but to determine the
former we first need to define and identify the latter.
MD Competence
45,3 Competencies are commonly agreed to reside in individuals and teams of individuals,
implying that the competence concept involves a cumulative hierarchy. This
cumulative hierarchy notion is evident in many streams of research concerning the
associated concepts: i.e. single-, double-, and triple-loop learning, which are based on
competencies, capabilities, and dynamic capabilities, respectively, according to Savory
396 (2006). Another researcher has adopted similar notions of hierarchy: i.e. first-order
competence, which comprises customer and technological competencies; integrative
competence, which is the ability to combine the previous competencies; and
second-order competence, which is the ability to create first-order competencies
(Danneels, 2002). Scholars also distinguish between “distinctive competence” and “core
distinctive competence” (Eden and Ackermann, 2000). The two competencies involve a
hierarchy: the former is a particular strength within a company that is difficult to
imitate and may be used to generate sustainable profits; the latter are competencies
“that primarily drive the aspirations system” (Eden and Ackermann, 2000, p. 16). A
final example of a hierarchy involves three competence categories: distinctive
competencies, which are the most important in a company; necessary competencies,
which do not differ from those of competitors but which are needed for operational
reasons; and protected competencies, which can hurt the company if misused (Heikkilä
and Cordon, 2002). The first two examples can be assumed to involve qualitative
hierarchy in terms of differences in importance.
A competence has been defined as “a cross-functional integration and co-ordination
of capabilities” (Javidan, 1998, p. 62), and as a set of skills and know-how resident in
strategic business units. Another scholar has defined the concept as “the ability to
sustain the coordinated deployment of assets in ways that help a firm achieve its goals”
(Sanchez, 2004, p. 521). The first quotation is quite vaguely expressed, and since we do
not know what the scholar means by “co-ordination” and “integration”, it is difficult to
apply his definition. Accordingly, his definition is not useful in our attempts to develop
empirical definitions. The second quotation is expressed differently, implying a
capacity directed towards goals. Still, an expression such as “. . . sustain the
coordinated deployment of assets . . . ” blurs the meaning, and makes it inapplicable to
our concerns.
We have already argued that a competence refers to a quality inherent in
individuals or teams of individuals, a quality that develops and refines something (e.g.
capabilities, resources), occasionally to a visionary end (e.g. to generate sustainable
profits). Here, we apply the general notion and conceptually define a competence as
developments made by individuals and teams.
Furthermore, a competence as empirically identified and meeting the three criteria,
most likely has one or several particular characteristics in line with the broader core
competence notion. Furthermore, since core competencies are key contributors to
organizational success, they must highly be developed, implying that minor
competence developments are unlikely to have any impact on them. For empirical
matters, we need to define a superior competence involving advanced forms of
development. Here, we propose that a competence should have improvement as its
main empirical characteristic; accordingly, a competence is here empirically defined as
improvements. In an empirical study recently conducted by the author, empirical
competencies having improvement as their main empirical characteristic involved, for
example, an R&D department’s competence to innovate, to develop products with Core competency
external partners, and to adopt and create individual customer solutions. Customer and beyond
employee interviews verified the latter as a core competence.
identification
Capability
A confusing aspect of the capability concept is that it seems to have two generic
meanings (Collis, 1994). The first meaning is capacity, as adopted by Javidan (1998). 397
One scholar has defined capability as “the capacity for a team of resources to perform
some task or activity” (Grant, 1991, p. 119). The second meaning is coordination,
consisting of a mix of routines, tacit knowledge, and organizational memory (Nelson
and Winter, 1982). Contemporary research has also distinguished capabilities as being
either operational or dynamic (Helfat and Peteraf, 2003). Operational capabilities
include all the routines generally involved when performing an activity such as
manufacturing, whereas dynamic capabilities (Teece et al., 1997; Eisenhardt and
Martin, 2000) are those that build, integrate, and reconfigure operational capabilities.
Winter (2003) also claims that capabilities are locally defined either as normal routines,
or as “activities to support change”, the first being zero-level capabilities and the
second being first-order dynamic capabilities.
The distinction of capabilities as either operational or dynamic may invoke a notion
of hierarchy, since the latter are considered as of higher organizational value. Several
scholars support that interpretation. Savory (2006) does so when defining double- and
triple-loop learning. Javidan (1998, p. 62) also cites the hierarchy notion when he
suggests that a capability is of less organizational value and complexity than a
competence is, defining a competence as the “cross-functional integration and
co-ordination of capabilities”. I feel that both these arguments are essentially
unsupported, because the researchers construct the hierarchy using the definitional
expression; here we define a capability by its most generic characteristics – as systems
and routines – regardless as to whether these characteristics are, for example,
operational or dynamic.
Thus, in this paper, capability is defined in accordance with Winter (2003), as
systems and routines. The “capacity” concept is too vague and difficult to identify or
measure empirically, so it is disregarded when considering the definitional issues.
Systems play crucial roles in many company undertakings, such as structuring core
competencies, and routines are also essential in organizing activities and processes.
These crucial functions suggest the existence of a supporting link between a capability
and a core competence. An empirical study recently conducted by the author found
evidence for the existence of the supporting link, since empirical capabilities involved
both internal systems (such as ISO certification) in quality and environmental issues,
and decentralized efficiency in administrative routines. The main characteristic of the
empirical capabilities identified was that they supported organizational activities and
processes; accordingly, capabilities and core competencies are here proposed to be
linked by support provided by routines and systems.

Resources
Resources are basic to an organization and are natural objects of study, since they form
inputs to the value process (Grant, 1991; Eisenhardt and Martin, 2000). Resources are
identified as sources of sustainable competitive advantage if they are valuable, rare,
MD inimitable, and non-substitutable (Barney, 1991). Another definition includes
45,3 capabilities as well as available assets (Sanchez et al., 1996). Javidan (1998) identifies
resources as building blocks of competencies, the former being inputs to the
organization’s value chain. It is easier said than done to construe that the resource
concept belongs to a hierarchy.
Here, I define resources in accordance with the general sense found in the literature
398 reviewed (e.g. Grant, 1991), defined as inputs to the value process in an organization.
With regards core competence, the empirical definition of a resource is that it utilizes
core competencies. The author recently conducted an empirical study that identified
empirical resources using the framework introduced here. In one case a core
competence was utilized by the resources marketing expenses, manufacturing skills,
and strong corporate finances; the last two items were found to have a major influence
on the core competence studied. In concrete terms, customers were concerned about
security issues; hence, the delivery security inherent in the company’s manufacturing
skills and strong finances were utilized and strengthened the customer loyalty-creating
core competence.

Discussion
Definitions
The differences between the associated concepts were assessed with regard to
conceptual definitions, empirical definitions, and hierarchical characteristics. The
findings suggest that a core competence does not need to be identified empirically;
rather, it can be analytically distinguished from a competence using three criteria,
making competence the central concept in core competence identification matters. The
definition of competence makes developments achieved by individuals and teams the
conceptual focus, and improvements the empirical focus (see Table I). The definition of
capability makes systems and routines the conceptual focus, and support the empirical
focus. A resource is conceptually defined as an input to the value process, and is
empirically defined as the utilization of core competencies.

Single hierarchy
From the literature review, it was possible to verify the hierarchical aspects of the
concepts to only a limited extent. Competence is the only associated concept that
involves both inter-concept and intra-concept notions of hierarchy (see Table I). The
former are manifested by the three criteria, which hierarchically link a competence to a
core competence in a qualitative way. The latter are manifested in the presence, in the
competence concept, of characteristics embodying notions of hierarchy, for example,
first- and second-order competencies (Danneels, 2002). The intra-concept hierarchy for
competence cannot be fully assessed in this paper, as we first need comprehensive
empirical studies to assess the hierarchical characteristics. With regards the capability
and resource concepts, the literature review revealed disagreement concerning the
de-verified hierarchies; however, any suggestions of hierarchy are mainly based on
definitional factors, for instance in Javidan’s (1998) competencies hierarchy. Another
example is Savory (2006), who defines competence, capability, and dynamic capability
as single-, double-, and triple-loop learning, respectively, which by design constructs a
hierarchy. Since this paper assumes a more basic definitional stance, trying to
determine the concepts’ most generic characteristics, I have deliberately disregarded
Core competency
Concept Conceptual definition Empirical definition Hierarchy characteristics
beyond
Core competence A competence that N/A Inter-concept: identification
satisfies three criteria: hierarchically linked to
competencies in a
qualitative way
1. Contributes 399
significantly to
customer benefit
from a product
2. Is competitively
unique
3. Provides potential
access to a wide
range of markets
Competence Developments achieved Improvement Inter-concept:
by individuals and hierarchically linked to a
teams core competence in a
qualitative way
Intra-concept: first-order
and second-order; Table I.
distictive and Conceptual and empirical
core-distinctive definitions and
hierarchical
Capability System and routine Support N/A
characteristics of core
Resource Input to the value Utilization of core N/A competence and the
process competencies associated concepts

such constructions. Thus, from basic definitional factors we can both conceptually and
empirically de-verify most of the notions of hierarchy pertaining to the particular
concepts. We now move the discussion of hierarchy from the individual concepts to
merged comparisons.

Merged hierarchy
The associated concepts do not limit each other’s scope. That is, the hierarchical link of
the competence concept to the core competence concept does not imply that the
capability and resource concepts are similarly linked. Resources, for example, may be
of more value to some organizations than capabilities and competencies are.
Accordingly, we cannot verify the qualitative aspects of the hierarchy of competencies
that Javidan (1998) suggests.
Furthermore, Javidan (1998) also suggests a cumulative hierarchy, though the
findings of the review do not support that notion. On the contrary, the review made it
obvious that the associated concepts have different characteristics, namely,
improvement, support, and utilization. Accordingly it is essential to acknowledge
the differences between them.
Thus, we propose that the associated concepts all reside at the same hierarchical
level. In a particular company, any one of the associated concepts could be of higher or
lower organizational value than is typical. For example, as previously mentioned, in a
MD case study company two particular resources were highly regarded by customers, and
45,3 were thus of major value to the organization.
We are now ready to outline a model of how the core competence and associated
concepts are linked. The core competence concept resides at the top, separated from the
associated concepts by a qualitative hierarchy based on its superior value to the
organization (see Figure 1). Even though a single core competence has greater value to
400 an organization than any single associated concept, its rarity implies that its value can
be outweighed by the accumulated value of the associated concepts.

Conclusions and implications


This paper examines the core competence concept in three stages: unraveling the
associated concepts’ fundamental aspects in conceptual and empirical terms,
de-verifying the hierarchies, and outlining a core competency model. This
examination has several purposes: First, to advance core competence theories to
meet the needs of practicing managers and consultants. Second, to introduce a
particular approach for use in conceptual and empirical reviews and discussions.
Finally, to provide, in the proposed model, a point of departure for core competency
research going beyond matters of mere identification.
This paper makes a significant contribution to the core competence literature.
Fundamental features of the associated concepts (competence, capability, and resource)
are suggested, since the conceptual review showed them to have characteristics that
differ both conceptually and empirically. In fact, the associated concepts convey
information regarding the core competence concept, by means of the different
influences they have on core competencies: competencies improve, capabilities support,
and resources utilize core competencies. By means of these influences, organizational
change and rejuvenation can not only be comprehended, but also managed. In
particular, our findings indicate that a core competence does not need empirical
definition, since it can analytically be distinguished from a competence by fulfilling
three criteria; this makes competencies the central concept for core competence matters.
Furthermore, the notions of hierarchy suggested in previous research, in particular the
competencies hierarchy of Javidan (1998), could not be verified; accordingly, we
conclude that the associated concepts all reside at same hierarchy level.
The practical implications of this paper are that, unlike other discussions of core
competency, it clearly reveals specific features of the associated concepts. By
presenting these details, in conceptual and empirical definitions as well as in
hierarchies, organizational core competencies can be identified, assessed, and
managed. This is of particular importance to organizations in need of organizational

Figure 1.
Outlined core competence
model: associated concepts
linked to the core
competence concept
change, which face, for example, dynamic and harsh business environments, in which Core competency
core competencies must be continually renewed. To advance core competence practice beyond
beyond mere identification, comprehensive organizational analysis is essential. Such
analysis would preferably start with core competence identification, with the guidance identification
of consultants and/or the existing literature. The core competencies empirically
identified would be examined for the associated concepts, in line with the core
competency model proposed here. That is, competencies are detected by means of 401
improvements, capabilities by supports, and resources by core competence utilizations.
Competence improvements are used to manage and change core competencies,
capability supports reinforce and create structure before, during, and after change, and
resource utilizations are operative and need daily attention.
Further research is needed to test the suggested empirical definitions in order to
refine their formulation and scope. Advancing this paper’s findings would also include
updating the core competence determinants, i.e. the three criteria; in their current form,
they are inaccurate and difficult to use in practical contexts.

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Corresponding author
Urban Ljungquist can be contacted at: urban.ljungquist@vxu.se

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