Final answer:
A company's dynamic capability is shown through its adaptability and ability to innovate, not by maintaining outdated practices. Key components include improving, upgrading, and adding to resources and capabilities, as well as proactive engagement with technological innovation and change.
Step-by-step explanation:
A company's dynamic capability is its ability to adapt, renew, and evolve its resources and competencies over time in response to a changing business environment. This includes a) the capacity to improve existing resources and capabilities, b) the ability to upgrade its R&D resources to drive product innovation, c) the capacity to add new resources and capabilities to the competitive asset portfolio, and d) the ability to replace degraded resources with acquired capabilities. However, e) the ability to keep antiquated resources by disregarding innovative capabilities does not represent a company's dynamic capability. A dynamic capability requires a focus on growth, adaptation, and ongoing transformation, rather than clinging to outdated methods or technology.
In the context of intra-industry trade, a company's productivity is driven by specialized learning, taking advantage of economies of scale, and the ability to adapt the value chain. This underscores the importance of technological innovation and R&D investment, which are critical components of a company's dynamic capabilities. Lastly, the concept that countries and companies must be flexible to ongoing changes aligns with the idea that dynamic capabilities are essential for maintaining and enhancing comparative advantage over time.