Narrow Results

This study discusses the role of core and symbolic capabilities during due-diligence processes when investing in companies in turbulent fields such as the biotechnology industry. The results indicate that investors' evaluations are hierarchical and are based on two premises. First, investors look for core capabilities — the characteristics that signal the potential for future success. They then search for symbolic elements, such as reputation, to confirm their decisions. The study expands earlier models of investors' evaluation processes. It also offers new insights for entrepreneurs of biotechnology firms.

This paper examines the nature of the core capabilities of a firm, focusing in particular on their interaction with new product and process development projects. Two new concepts about core capabilities are explored here. First, while core capabilities are traditionally treated as clusters of distinct technical systems, skills, and managerial systems, these dimensions of capabilities are deeply rooted in values, which constitute an often overlooked but critical fourth dimension. Second, traditional core capabilities have a down side that inhibits innovation, here called core rigidities. Managers of new product and process development projects thus face a paradox: how to take advantage of core capabilities without being hampered by their dysfunctional flip side. Such projects play an important role in emerging strategies by highlighting the need for change and leading the way. Twenty case studies of new product and process development projects in five firms provide illustrative data.

The core capabilities of an organization include critical skills of employees, management systems, and norms and values. Core capabilities may be transferred formally and explicitly. However, much knowledge, particularly knowledge with rich tacit dimensions, is transferred informally through processes of socialization and internalization. We focus on two transfer mechanisms—mentoring and storytelling—that can leverage the knowledge of an organization, particularly its tacit knowledge, to build core capabilities. We draw on relevant research in learning and cognitive psychology to clarify the conditions under which mentoring and storytelling can be most effective as carriers of knowledge. Finally, we present recommendations for specific managerial practices that follow from our analysis.