Responding to climate induced external change:

Research is recognising that managers play an important role in the development of dynamic capabilities. Yet, studies focusing on how managers influence the evolution of capabilities remain scarce. There is a limited understanding of where capabilities come from and how they are built. This research attempts to fill parts of this gap by exploring how managerial processes and activities influence an organisation's ability to create, extend, or modify its resource base in light of its environmental and strategic context. Applying a process perspective, the study examines the dynamic interrelationships between the external context triggering managers to undertake capability building and the subsequent actions taken and managerial processes employed in a way that might address some of the unresolved issues in the dynamic capabilities domain. Research findings suggest that dynamic capabilities are context dependent with external events influencing the managerial decision making that shapes their evolution. Dynamic capabilities are shaped by enabling and inhibiting variables both outside and inside the organisation, including the perceptions and motivations of managers and their interpretation of the environment. The research further uncovers managerial processes and activities at work during the early stages of the capability development process, adding to the understanding of how organisations move from its starting position towards a new or adjusted path. Key capability building enablers and inhibitors are also identified and addressed, adding to the overall understanding of how dynamic capabilities can be purposefully built. The capability used as a framework for examining capability building relates to the management of corporate carbon emissions. Because the dynamic capability perspective rests upon the fundamental idea that firms must alter their resources according to external change, the capability was considered a contingent choice. Strategic impacts of climate change on organisations are intensifying as countries worldwide are implementing measures for transforming towards low carbon economies. Increasing pressure from regulations, public opinion, financial institutions, and climate oriented consumers are triggering a complex interplay of external and internal forces, leading firms to consider carbon issues in their strategic management. Corporate carbon management is further considered suitable for exploring the early stages of capability development. The concept of having to carefully manage the amount of carbon directly or indirectly emitted as a result of corporate activities, whether it is to comply with climate change regulation, respond to stakeholder pressure, or to improve competitiveness, is an emerging area of practise for many firms.