Managerial actions using historical values for tackling hyper‐competitive environments: The case of Toyota

Research Summary This study provides a causal explanation concerning how managerial actions using historical values contribute to dynamic capabilities, or sustaining competitive advantage in changing environments. Based on historical methods that consist mainly of hermeneutics, contextualization, and source criticism, it analyzes sources and data on how Toyota strategically responded to the competitive dynamics of the automotive industry centered around modularization. This resulted in the identification of three types of managerial action using historical values—filtering, integrating, and modifying—which have a rhetorical influence on the processes of strategic diagnosis, choice, and action respectively in ways that strengthen the microfoundations of dynamic capabilities. This enables the firm to adapt to hyper‐competitive environments while maintaining the idiosyncrasies of its core capabilities. Managerial Summary Toyota has sustained its competitive advantage for decades by consistently relying on its core capabilities, especially the Toyota Production System and its longstanding supplier relations. How has Toyota been able to do so while facing rapidly changing environments? This paper seeks to explore this question by comparing Toyota's and Nissan's strategies in response to modularization in the automotive industry in the 1990s and 2000s. It uncovers how a firm's managers can utilize historical values in ways that influence the processes of strategy formation and implementation. This allows the firm to incorporate key elements of new strategies that its rivals introduce in the marketplace alongside the firm's strategies based on its core capabilities, thereby adapting to hyper‐competitive environments while sustaining its idiosyncrasies and competitive advantage.