While learning is still in an analytical vacuum (as well as empirical) in the competence perspective, a few theoretical studies have been concerned with combining a static competence

approach with the more dynamic theories on organizationallearning (e.g. Nordhaug, 1993;

Kogut & Zander, 1992; Helloid & Simonin, 1994). A theory of organizational learning must

include a static component (Nordhaug, 1993; Kogut

Zander, 1992), that is a present analysis

of the skills (Nelson & Winter, 1982), knowledge (Kogut & Zander, 1992) or competence

(Nordhaug, 1993) that will influence the question how and what kind of learning processes can

be implemented.

the same way, a competence perspective must include a dynamic

component (Nordhaug, 1993).

In order to analyze the dynamic argument embedded in the core competence perspective, it is important to note that firms do best in tasks closely related to present activities (Cyert &

March, 1963; Nelson & Winter, 1982). In fact the approach is based on the assumption that

"the core competencies which will retain competitive advantage in the future are built on the core competencies of today" (Bogner & Thomas, 1994). Therefore a firm must carefully consider the balance between exploitation of existing competencies and the development of new ones (Wernerfelt, 1984; Cohen & Levinthal, 1990). The efficiency of performing new activities in terms of both costs and time will therefore be dependent on to what degree the competencies necessary to perform the new activities are close to the existing ones. This is maybe the most important issue when focusing on primary competence.

Competitive locus. Hamel (1994) distinguishes among three broad types of core competencies; market-access competencies, integrity-related competencies and functionality-related competencies. The latter focuses on the kind of competence of concern in this study, that is, competencies which contribute to better performance and more effective, cost-reducing activities in the operational day-to-day work's. Itis the kind of competencies that are necessary to perform the activities directly related to the core products of thefirm.

Describing and defining primary competence

In regard to the four components above, the component of corporate span is of lesser importance when focusing on primary instead of core competence. This component is linked to the uniqueness that is embedded in the argument offered by Prahaled & Hamel'S, and may be seen as the component that distinguishes primary competence from core competence. This conceptualization is very similar to the way Teece, Pisano & Shuen (1997) recently distinguished between core and distinctive competencies. According to Teece, et al. (1997), core competencies "are those competencies that define a firm's fundamental business as core"

(p. 516). Additionally, they state that ''the degree to which a core competence is distinctive

14 This, however, does not imply that afirm

s

15The uniqueness can be traced to Prahaled &Hamel's arguments that a core competence must be competitively unique and be a gateway to new markets. Or as Hamel (1994: 14)put it:A competence should not be considered core unless "the company's level of competence is substantially superior to all others".

depends on how well endowed the firm is relative to its competitors, and on how difficult it is for competitors to replicate its competencies" (p. 516). Thus, compared with Teece, Pisano &

Shuen, a primary competence approximates a core competence, while unique competence approximates distinctive competence. Consistent with Teece, Pisano & Shuen (1997)16, a primary competence is defined, asone of those competencies that define a firm 'sfundamental business as core.

Moreover, it is important to note that primary competence is but one category of the competencies a firm possesses. A firm will surely possess other competencies that must be present in order to perform well (see e.g. Nordhaug, 1993: Chapters 3&4, for an overview of different competencies a firm possesses). However, the primary competence would be what further competence development must be based on. Without primary competence, the firm would not have any basis for staying in business.

2.4.3 Defining and outlining closeness to primary competence (CPC)

A definition

For a buyer, the competence that is close to the present competence base would be the target for "borrowing" from the vendor. A buyer may find out that he actually has many of the necessary competence elements himself, and thereby try to imitate the remaining parts in order to perform the transaction "in-house". Or he may, because of a relatively long lasting relationship, have incorporated many parts of the elements in his own routines or competence base through intemalleaming processes. However, it is the closeness in competence that is the main argument for the buyer to incorporate the knowledge in the routine "pool". Thus, the existing underlying competence is used as a catalyst (Verdin & Williamson, 1994) in the further process of accumulating those competencies that without the existing competence base would be much slower and costly to build and incorporate in the routine pool.

16 We prefer the distinction between primary and core competence because this seems more consistent with the core competence literature in general. As discussed above. in the literature core competence is often viewed as a competence that contributes to be one o/the world leaders in afield.

Following the discussion in this section, the definition of closeness to primary competence is the degree to which the finn

's

This concept can be used when analyzing expansion offirms' competence bases in general. The phenomenon examined in this dissertation, however, is restricted to buyer-vendor dyads, and transactions as the basic unit of analysis. The operationalization of environment-specific