Academic journal article Journal of Global Business and Technology

Resources, Dynamic Capabilities and Australian Business Success

Academic journal article Journal of Global Business and Technology

Resources, Dynamic Capabilities and Australian Business Success

Article excerpt

ABSTRACT

A study was conducted in late 2009 in the aftermath of the Global Financial Crisis in order to determine the resources and dynamic capabilities that are considered important for success by leaders of Australia's listed companies. A mail survey was administered to 2000 executives in November, 2009. Respondents felt that financial capital, technological know-how, specific staffing issues (competence, experience and inter-relationships), and reputation were the most crucial resources. The most important dynamic capabilities were leadership, long-term and big picture strategic thinking and organizational culture. These concrete dynamic capabilities enable the building, integration and reconfiguration of an organization's resources in turbulent environments. The dynamic capabilities view of the firm overarches the resource based view because of its capacity for handling environmental exigencies. Critical success measures were considered to be increased Return on Investment (ROI), Return on Equity (ROE), share price, cash flow, profit and growth. A practical playbook for managing in changing times is provided at the end of this article.

INTRODUCTION

In a recent article, Sirmon and Hitt (2009) describe how environmental turbulence, caused by the introduction of new technologies and increased globalisation, forced many service offering companies to rethink how they would relate to their customers moving forward. The global financial crisis (GFC) and its aftermath have highlighted the importance of companies being able to acquire and develop resources and capabilities to deal with environmental contingencies and exigencies. The GFC began with the collapse of the sub-prime mortgage market in 2008. Mortgages were taken out at low interest rates by customers who could not afford to pay them back when fixed rates reverted to variable market rates. The effect of this crisis was not limited to the United States but it also affected most other countries in the world, including Australia. Before the crisis, sub-prime mortgages were securitised, pooled into investment vehicles and sold to investors, including British and Australian banks and even local councils in cities, such as Perth, Australia. These investment pools have been described by Tarriquzzamam et al. (2008) as constituting much of the so-called toxic assets at the heart of the crisis.

House prices fell in the United States and elsewhere in the world, and so financial assets relating to mortgages lost value and banks restricted credit, even in Australia. 'Because Australia has a substantial deficit on the balance of payments in the current account, which is funded by international borrowings by financial institutions ... at present the crisis has largely stopped those borrowing[s]' (Tarriquzzamam et al. 2008: 4). However, as will be shown shortly, this was to change very quickly in Australia. Recently Carpenter (2010: 5) posed the question, 'What does it mean to manage effectively through tough timesT [such as these] 'Is there really no playbook to follow?' He added (2010: 5) that, 'for some organizations, effective management will make the difference between death and survival. For other firms, effective management will position their organizations to emerge from the downturn alive - with greater focus, clearer purpose, and brighter future prospects'. In this paper it will be argued that this playbook for managers consists of developing and implementing the excellent concrete dynamic capabilities and resources that Australian executives, across many disparate industries, consider critical for success.

This research is valuable because while the USA, the UK and more recently Greece and Ireland, have found difficulty emerging from the recession post-GFC, Australia's economy has, on the other hand, recovered much quicker. So much so that the Reserve Bank of Australia (RBA) increased interest rates an unprecedented five times in the seven months to April 2010. …

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