The dynamics of position, capability, and market competition

This article focuses on the dynamic relationship between the occupancy of a high-status position and the development of organizational capabilities. If, on the one hand, the cumulative advantage inherent in a high-status position gives rise to greater competitive strength, on the other hand, some scholars have emphasized how occupancy of a well-defined market position, such as a high-status one, weakens competitive intensity by reducing the motivation to compete aggressively. By integrating both perspectives, this article proposes a dynamic account of the relationship between occupancy of a high-status position and development of capabilities. Despite being more complacent with exchange partners, occupants of a high-status position extend such position by entering in new exchange relationships with partners providing resources of higher quality. Yet, occupancy of a high-status position undercuts the development of capabilities within the boundaries of the firm, leaving the firm less able to use and integrate the resources provided by existing exchange relationships. Evidence comes from an examination of Formula One racing teams and their engine suppliers.