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this sense, they are pre-set attributes of individuals and firms, with the
enhancements typically produced either internally to the firm or by a
different organization. For example, one may think of the firm's endow-
ment of adequate skills as the necessary internal competencies to obtain
value from R&D and innovation investments (Piva and Vivarelli 2009).
Meanwhile, capabilities involve both learning and the accumulation of new
knowledge, and also the integration of behavioural, social and economic
factors. Consequently, capabilities are to be taken as outputs of learning
processes that in their collective dimension can be highly localized, giving
rise to 'system' capabilities, that is, referring to a specific spatial and indus-
trial setting (von Tunzelmann, 2009b). In other words, while technological
competencies are prerequisites or resources for innovation activity, tech-
nological capabilities correspond to knowledge that, through learning and
absorption, is ready to be incorporated into new products and processes.
For instance, a pharmaceutical firm endowed with an adequate R&D lab
and performing research on a new vaccine is a firm with technological com-
petencies, while a competitor already testing a new vaccine on patients is a
firm with technological capabilities (Iammarino et al. 2012).
A further criticism of the literature on capabilities has been the limited
emphasis put on the increasing multi-technological nature of products
brought about by technical advances. The main implication here is that, in
multi-technology settings, the number of technologies is simply too high
to be managed entirely within any single firm, even if the firm is an MNE.
This observation emphasizes two strictly connected issues, namely the
relevance of sources of technology which are external to the firm, and in
particular linkages with science; and also the role played by relational and
interactive capabilities for creating new knowledge.
The first issue is the specific focus of the systems of innovation approach
discussed in detail below. Briefly, other actors of the production system
(universities and public research institutes, government, finance sector,
and so on) also develop dynamic capabilities in their interactions with
firms (Coriat and Weinstein 2002). Thus, the system as a whole builds on
dynamic capabilities because its agents are able to deploy effectively inter-
organizational routines (Fujimoto 2001; Zollo et al. 2002). These links
may promote the system's capability for action through effective execution
of problem-solving processes in the face of an uncertain business environ-
ment (Eisenhardt and Martin 2000; Griffith and Harvey 2001; Leoncini
et al. 2006). Thus inter-organizational and collective learning processes
occur at the system level (Cowan et al. 2000). Nevertheless, the possibil-
ity also exists that systems, like firms, may neither accumulate knowledge
efficiently, nor be able to learn and develop capabilities (Winter 2003).
The second issue, which is the role of relational and interactive
