Template-type: ReDIF-Paper 1.0
Author-Name: Coad, Alex
Author-Email: alex.coad@waseda.jp
Author-Workplace-Name: Waseda Business School
Author-Name: Mathew, Nanditha 
Author-Email: mathew@merit.unu.edu
Author-Workplace-Name: UNU-MERIT, Maastricht University
Author-Name: Pugliese, Emanuele
Author-Email: emanuele.pugliese@ec.europa.eu
Author-Workplace-Name: European Commission, Joint Research Centre (JRC)
Title: Positioning firms along the capabilities ladder
Abstract: We develop and apply a novel methodology for quantifying the capability
	 development of firms, and putting these capabilities (and hence also the
	 firms) in a hierarchy, that we refer to as their position on the
	 capabilities ladder. Our nestedness algorithm, inspired by biology and
	 network science, defines a capability as complex if it is performed by
	 only a few firms at the upper rungs of the ladder. We analyze balance
	 sheet and innovation data of almost 40,000 Indian firms for the time
	 period 1988-2015, and observe significant nestedness. Lower rungs of the
	 capabilities ladder correspond to basic managerial and production
	 capabilities. Mid-level rungs correspond to internationalization and
	 acquiring absorptive capacity. Higher level rungs are more related to
	 M&A and innovation. ICT capabilities have become more fundamental
	 lower-level rungs on the capabilities ladder in recent years. We find
	 that capability ranking can explain future growth patterns and survival
	 probability of firms, summing up in one number their future potential
	 trajectories.
Classification-JEL: L2, D2, O12
Keywords: Capabilities, Competences, Complexity, Balance sheet data, Resources
Series: UNU-MERIT Working Papers
Creation-Date: 20210813
Number: 2021-031
File-URL: https://unu-merit.nl/publications/wppdf/2021/wp2021-031.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2021031