How do firms use their dynamic capabilities in strategic factor markets? The role of resource rarity

Abstract

This paper explores the use of dynamic capabilities in evolving strategic factor markets (SFMs), with an emphasis on the role of resource rarity. We investigate how the three dimensions of dynamic capabilities—sensing, seizing, and reconfiguring—interact with resource rarity to influence the economic value of resource acquisition. Our framework introduces the concept of a “resource rarity lifecycle,” which tracks the trajectory of resources within SFMs, shaped by the pace of change in market conditions. In slow-paced SFMs, rare resources remain rare for longer, justifying investments in sensing and seizing capabilities. In contrast, in fast-paced SFMs, rare resources quickly become common, making investments in reconfiguring capabilities more economically viable. We conclude with a discussion of theoretical implications and suggest potential avenues for future research.