Dynamic Capability is defined as "The ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments."
The term Dynamic Capabilities was first introduced in a working paper in 1989, was influenced by Gary Hamel's multinational strategy research leading to Core Competences of the Corporation and was cited in Ikujiro Nonaka and Hirotaka Takeuchi's Innovation strategy work-The Knowledge-Creating Company.
The basic assumption of the dynamic capabilities framework is that core competencies should be used to modify short-term competitive positions that can be used to build longer-term competitive advantage.
Dynamic capabilities theory attempts to deal with two key questions:
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