UC Berkeley

In management studies, systems theory is an underexplored construct consistent with the dynamic capabilities framework. The systems approach received attention from management scholars in the middle of the last century, but, since then, has been largely abandoned. Meanwhile, academic disciplines have continued to narrow their focus. The capabilities and systems frameworks both adopt a holistic view that calls for all elements of an organization to be in alignment, and both recognize the importance of some form of learning for the purpose of adaptation. Dynamic capabilities go further by recognizing that organizations not only adapt to the business environment, they often try to shape it, too. While systems theory emphasizes internal stability over time and homogeneity across similar systems, dynamic capabilities include an explicit role for management/leadership that allows systemic change to start from within, which is the source of heterogeneity across firms. Dynamic capabilities are part of a system that includes resources and strategy. Together they determine the degree of competitive advantage an individual enterprise can gain over its rivals.