Thoughts on Capabilities From the Interesting Sutton
| Nicolai Foss |
We have spent too much time on this blog discussing Bob Sutton. A much more interesting Sutton is John Sutton, the Sir John Hicks Professor of Economics as the London School of Economics. Sutton is the author of numerous papers and books (e.g., the highly influential Sunk Costs and Market Structure). He has had some influence on strategic management thinking, mainly (obviously) among those who base strategic management on industrial economics.
In a recent paper, “Competing in Capabilities: An Informal Overview,” the influence goes the other way, as Sutton takes seriously the notion of capabilities, a central, if not unproblematic (cf. this, this, and this) construct in strategic management research (but actually originating in economics in this paper).
Sutton’s approach is to take relatively traditional ideas from standard production theory (akin to the approach in this paper) and add his ideas on sunk cost to make sense of differential capabilities in the context of competition, trade and development, globalization, and technology transfer (in contrast, he is not interested in explaining capabilities themselves). The paper does reach some interesting conclusions, e.g., relating to the dependence of market structure on capability investments, but doesn’t seem terribly innovative compared to what has been going in formal evolutionary economics and some parts of the international business literature (I may be wrong, of course; make your own judgment), but it is certainly interesting to note this case of spillover from strategic management to industrial organization.