Dynamic capabilities and firm performance: the rise and fall of Charles Schwab

Drawing on the tenets of dynamic capabilities theory and the results of a longitudinal case study, this article proposes a conceptual framework to explain how firms transform key resources in a dynamic business environment, recognizing that resources are enduring, complex, and hard to change. The framework distinguishes between two types of capabilities—operational and dynamic capabilities—and identifies different pathways they take to competitive advantage and performance. The paper also conceptualizes architectural and absorptive capabilities to explain the circumstances in which dynamic capabilities may (or may not) contribute to firm performance. The empirical results provide insights for service managers and marketing professionals about how to deploy dynamic capabilities to sustain competition in a dynamic environment. Implications for research and practice are discussed.