A real options approach to managing resources and capabilities

The resource‐based view (RBV) and the dynamic‐capabilities approach (DCA) have emerged as two important frameworks in strategic management that seek to explain why firms are different. In recent years operations management scholars have sought to integrate both RBV and DCA within the field's epistemological orientation to provide normative frameworks for practising managers. This paper argues that the structure of resources and capabilities are such that they present impediments to normative prescriptions. Using ideas from complex systems it argues that any framework for thinking about resource accumulation and capability development must take account of uncertainty and knowledge imperfections in the system. The paper contends that the real options framework is an appropriate heuristic for managing the process of capability development and a case study of a manufacturing operation is used to illustrate our ideas.