Dynamic Adaptation as Continuing Co-creation

This chapter conceptualizes dynamic adaptation of profit-seeking firms in terms of dynamic processes involved in the co-creation (or co-evolution or co-construction) of the two integrands of the dynamic context of their strategic actions: (a) the dynamic strategic context (internal- or micro-environment) and (b) the dynamic structural context (external- or macro-environment). The growth path of a firm is determined not just by its routines/competences but by its competence–environment interaction. The dynamic relationship between a [dynamic] firm and its [dynamic] environment is not just the one in which the firm changes itself to create a new relationship but also constructs its own environment by its strategic behavior. A firm is engaged in a continuous process of creating and destroying its own environment, mostly in a way conducive to its own growth, however, sometimes in a way that makes it a hostile environment for others. The distinction between one-way adaptation (i.e., firms successively adapting to their dynamic environments) and two-way adaptation (i.e., firms successively adapting their dynamic environments to themselves and vice versa) concerns issues related to both the concept of adaptation and the conceptualization of how adaptation works. Think of the firm’s dynamic adaptation problem in one-way adaptation as managing its dynamic portfolio of competences (i.e., strategic context). Think of the firm’s dynamic adaptation problem in two-way adaptation as managing its structural context.