Designing a Competitive Advantage Model Through Dynamic Capabilities and Differentiation Approach for Iranian Knowledge-based Companies

The worldwide competitive struggles in high-tech environment such as knowledge-based companies have featured the necessity to infer how competitive advantage is gained. Dynamic capabilities as the origin of competitive advantage emphasize the changing character of the environment and nature of future competition, acceleration in innovation growth, and the main role of strategic management in adaption, integration, and reconfiguration of organizational skills, resources, and working competences toward shifting environment. The recent inquiry is based on an interpretive paradigm and an inductive approach. The qualitative part of the research is conducted with exploratory purpose through grounded theory strategy. In quantitative part of study, it is continued with explanatory and descriptive purposes through survey and correlational research strategies. The probe concepts and variables are analyzed in 30 top knowledge-based companies located at growth centers of 6 high-ranking universities of Iran working on electronics and informatics field. The results of the research indicate that achieving knowledge-centricity main phenomenon through dynamic capabilities requires presence of value creation on the basis of resource orientation together with competences. The knowledge-based companies can reach the summit and sustainable success in the knowledge-centricity main phenomenon when they consider two kinds of specialized paths related to the differentiation strategies and knowledge-based strategies. Along with these two paths, contextual factors of environmental cognition, knowledge management and knowledge approaches, and the intervening conditions of branding and brand management, and strategic agility are identified that have a positive and significant effect on both strategies. The final designed model explicates how to gain competitive advantage for the studied companies through dynamic capabilities with regard to the differentiation and the knowledge-based approaches.


Introduction
The companies' chief question in the field of strategic management is how to obtain and sustain competitive advantage. Confronting this challenge can be pursued by the dynamic capabilities approach, which opens the way for firms to analyze the sources of value creation. This approach is related to rivalry based on innovation, competition in pricing policies, optimization of performance, augmentation of returns, and creative alteration of preceding competences. With this approach, corporate-level success or failure can be justified. Reviewing accepted theories in strategic management exposes competitive conditions that can reflect competitive strategy. Despite the fact that many theories have been promoted during past three decades in the context of competitive advantage sources, only a few constructed theoretical frameworks have been configured. Capabilities are the skills of a firm to coordinate and employ resources efficiently. A capability can enable a company to produce unique and creative products and services. The organizational capability is regarded as the ability to change and accept financial, technological and strategic evolution. The firm's competences are made by capabilities which come together. The core competences are those competences by which the company can do things that the others are not able to do. Having these competences makes it easier to attain the competitive advantage. In this study, the researchers make an effort to achieve a novel perspective of gaining competitive advantage for a knowledge-based product or service through dynamic capabilities. The concept of dynamic capabilities supplements the fundamental proposition of the resource-based viewpoint of the company as a great and effective vigor. Dynamic capability is the ability beyond operational competence that not only enables companies to originate and invent, but also leads to profitable innovations. The universal competitive combats in high tech and knowledge-based companies have clearly revealed the necessity for an augmented paradigm to know how competitive advantage is obtained. In international markets, successful firms are able to demonstrate convenient responsiveness and product innovation, coupled with knowledge-based strategies to make customers not only buy a brand but also make them pull towards a differentiated product or service. Under this term, one knowledge-based company is able to coordinate and rearrange internal and external competences towards competitive advantage through dynamic capabilities.

Competitive Advantage
A competitive advantage is an advantage attained over against competitors through offering higher values or lower prices for customers, providing additional benefits for a product or a service that can have a role of the justifier for possibly higher prices. Identifying and cultivating a competitive advantage can be considered as an increased profit or a sustainable and successful venture over the long term (Porter, 1990). Competitive advantage involves a set of factors or capabilities that enables the company to perform better than competitors (Barney, 1991). The rapid response that comes from the entrepreneurial orientation of the organization is regarded as a source of competitive advantage (Lumpkin & Dess, 1996). Byrd and Turner (2001) used four dimensions of innovation, market position, imitation difficulty and mass customization to measure competitive advantage. An enterprise experiences competitive advantage in an industry or a market when its activities generate economic value and not many firms are engaged in similar activities. The most common definition of competitive advantage in the competition strategy area and the value creation context is whatever that will increase revenue beyond cost (Rumelt, 2003). An agile organization can have a successful performance in satisfying rapidly changing market needs and gain competitive advantage through the capabilities of responsiveness, competence, flexibility and speed in a competitive environment (Li, Ragu-Nathan, Ragu-Nathan, & Rao, 2006). Four factors help a company to gain and retain competitive advantage, which contain efficiency, quality, innovation and customer responsiveness. Each of these factors is a distinctive competence for the company. In fact, they are general distinctive competences so far as they allow the company to differentiate its products presentation, offer more values to the customers, and lower its cost structure (Hill & Jones, 2007). The reputation has an important role in value creation and competitive advantage (Sheehan & Stabell, 2010). A company achieves competitive advantage when it creates more value for the customers than competitors, so that the customers find that company's products and services better than the competitors. Creating value can be achieved through the supply of products and services with lower price or higher quality or more benefits. Competitive advantage is measured in terms of cost, quality, competence and speed (Ambe, 2010). Strategic leadership capabilities affect competitive advantage (Mahdi & Almsafir, 2014). Competitive advantage is identified as the rate of return higher than average (Wang & Ahmed, 2007;Eriksson, 2014). In terms of performance, competitive advantage can operate alone or in a combination of multiple advantages interacting with each other as an integrated entity. In first case, it is considered as the sustainable competitive advantage; and in connection with time, it has a long-lasting function time and easily accessible by competitors (Kumar et al., 2015). The concept of competitive advantage is directly related to the customer's desired values (Evans, 2016). Competition in a global level generates new conditions of communications, and also a new level of quality in technological advance and new ways of gaining competitive advantage. One significant solution that leads to increase the enterprise efficiency is collaboration on business, globalization and knowledge. Inter-organizational relations are the source of competitive advantage for contemporary companies (Rzepka, 2017). Resources and capabilities along with strategies clarify competitive advantage, but their relevance and importance vary for each type of enterprise (Lorenzo, Rubio, & Garcés, 2018). Innovation is the strategic tool in the competition for improvement, creation, and strengthening of business to create competitive advantage (Distanont & Khongmalai, 2018). IT strategy and IT structure have a direct effect on competitive advantage (Saeidi et al., 2019).

Dynamic Capabilities
In past years, a considerable number of researchers believe dynamic capabilities to be at the core of the corporate strategy to create value and gain competitive advantage (Eisenhardt & Martin, 2000;Teece, 2007;Winter, 2003). Dynamic capabilities refer to the ability of a company or an organization to create manufacturing and service processes of new products in order to respond quickly to environmental changes (Helfat et al., 2009). Barrales-Molina et al. (2010) identify these capabilities as the ability of a company to integrate, build, and reconfigure internal and external skills in order to respond quickly to dynamic environments. Dynamic capabilities have been proposed as a means of removing turbulent environments with the help of managers to expand, refine, and reproduce existing operational capabilities to new ones compatible with the environment (Pavlou & El Sawy, 2011). Jantunen et al. (2012) suggest that dynamic capabilities are the higher-order capabilities to modify operational and learning capabilities in new domains, and are therefore crucial for innovation activities. Many researchers consider dynamic capabilities as a process related to the ability of organizations in reconfiguring the resource bases. They confirm that dynamic capabilities get the organization to be involved with its resources in order to reform the operational capabilities and find new capabilities which lead to competitive advantage (Masteika & Čepinskis, 2015). Dynamic capabilities are those organizational capabilities that allow companies to profit from producing differentiated products and services and manage the production of those which address new and existing market demands. Strong dynamic capabilities enable enterprises to produce not only the best type of product or service but also something that is unique and valuable (Pundziene & Teece, 2016). For developing dynamic capabilities, it is suggested that firms improve the connections among their employees and empower their innovative potential. High-quality relationships and dialogue allow participants to advance and accept proposals for change even in the presence of conflicting viewpoints, and enhance the capacity to be flexible with market alterations (Salvato & Vassolo, 2018). According to dynamic capabilities theory, entrepreneurs are more capable of sensing, seizing and reconfiguring resources and opportunities in vibrant entrepreneurial ecosystems (Roundy & Fayard, 2018). Dynamic capabilities are more in the sense that organizations not only adapt to the business environment, but are mostly used to form it in many cases. These capabilities are part of a system that includes resources and strategy. The dynamic capabilities framework has been made to help organize and prioritize the infinite stream of competing and conflicting information that cascades toward managers as they try to gain competitive advantage. These capabilities specify what the company can do and how impressively it is able to make changes (David J Teece, 2018b).

Differentiation Approach
The effects of the differentiation approach on products manufacture are embodied in specific features of companies' products which can be mentioned in terms of design, size and color. Such features will be more prominent as incentives for customers to persuade and attract them to buy products (Stewart, 1996). Differentiation is one of the main factors influencing one's desire to be identified by the unique brands and organizations (Bhattacharya & Sen, 2003). When one individual tends to be identified by the brand, differentiation in the brand will be the chief factor in its selection (Berger & Heath, 2007). In technology service organizations (TSOs), the differentiation strategy and operational independence have been examined in the process of innovation and the results reveal that they have a positive impact on the innovation process (Das & Joshi, 2007). According to the theory of being unique, the need for differentiation and being unique is one of the key elements of an individual's motivation to create a good sense of self (Berger et al., 2005). Emotions play an important role in the consumer's choice structure, which complicates the task of creating a differentiated marketing strategy. It means that suppliers need to give more consideration to consumers' self-awareness (Barrena & Sánchez, 2009). Differentiation has a significant impact on the prices and profits of one company to the extent that having more competitive advantage is useful to retain and intensify the differentiation advantage against competitors ( (Rong et al., 2013). Differentiation approach has a positive impact on contemporaneous performance of an organization that allows a firm to maintain its current performance in the future. The differentiation strategy is also associated with greater systematic risk (Banker et al., 2014). The differentiation strategy affects profitability and organizational growth. Choosing a differentiated and direct-to-consumer distribution channel can positively help the company to increase gross profit margin and growth rate of the organization (Newton, Gilinsky Jr, & Jordan, 2015).

Knowledge-Based Companies and Strategies
Three categories of characteristics are effective on the growth of knowledge-based companies. These attributes are firm-specific characteristics, founder-specific ones and external factors (Almus & Nerlinger, 1999). Knowledge is regarded as an advantage for knowledge-based companies in such a way that the companies are constantly updating their knowledge in order to be at least equal to their competitors (Wiklund & Shepherd, 2003). By acknowledging the significance of science and technology in economic development, its logical consequence, namely the great importance of production capacity creation and innovation by knowledge-based companies becomes more apparent (Etzkowitz, 2006). Knowledge-based companies are deduced from the view on the basis of valuing the new opportunities connected to the knowledge-based economy and valuing the opportunities of the classical economy in a new way with emphasis on the importance of knowledge (Nicolescu, 2006). Three groups of individual, corporate and environmental factors influence the growth of new knowledge-based companies. Individual factors include gender, age, level of education, managerial and work experience, operational skills, training, successful and unsuccessful experiences; corporate factors contain company age, legal status; size, ownership and managerial characteristics, and finally environmental factors include confusion, heterogeneity, environmental dynamism, customer structure, location, competition and monopoly of the company (Rannikko, 2012). To become a knowledge-based company, a corporation employs university alumni in the first step. In the next step, it shifts its focus to use professionals who work on solving unusual problems. These problems require a combination of convergent, divergent and creative thinking (Massingham, 2008;Jennex & Durcikova, 2013). In the modern world economy, which is called the knowledge economy, the importance of intangible resources is far greater than tangible resources, because their business requires more time. Therefore, knowledge-based companies need to develop intangible resources for their growth that the most important of which are brand resources (Rosenbaum-Elliott, Percy, & Pervan, 2015). The new approaches to strategy and organization are the reflections of significant alterations in economics, business and knowledge management. These changes have led to the emergence of a new type of strategy, the so-called knowledge-based strategy, based on two components not commonly found in classical strategies. These two components are knowledge and learning. Knowledge is the most important strategic resource of the company and learning is the most influential skill of the organization (Zack, 1999). A set of main elements should be considered in the analysis, designing and using of the strategies based on knowledge. Theses elements include understanding the subject of a knowledge-based organization system and its need for change; focusing on the activities that make the virtual value chain of knowledge-based organization; identifying supporting and opposing forces to change; creating the vision for strategic change; presenting the organizational change message; the creation of the strategic coalition for change; creating a strategic coalition for change; building teams to reach final change; giving information, training and offering consultancy for the participants to change; allocating a remarkable part of time and budget for change by related managers of the knowledge-based company; reflecting this reality by the leaders of change processes, there is no turning back to the previous situation; intensive and close communications between participants for change; the strong involvement and participation of individuals from sectors that are subject to operational change processes; encouraging and supporting the staff creativity; the prudent but effective monitoring of the strategic change processes performance; the specified assessments of progress and results of strategic change; corrections and improvement operations during change; and building sustainable change through knowledge-based strategies (Whitehill, 1997).
Achieving the strategy based on knowledge of the organization is founded primarily on the same approach of logic and methodology as a classic business strategy. Knowledge has the indispensable and decisive role in the strategic knowledge based process to the extent that if a strategy is not developed, the knowledge management needs to conduct an audit of knowledge. It should be noted that it is not possible to achieve the operational strategy of knowledge without redesigning the knowledge management system. The changes which are of realities happen in the content of each phase because of the transition in the foreground of knowledge in many cases such as raw materials, capital input, product and competitive advantage (Muthusamy & Palanisamy, 2004).

Research Process
According to the main topic and purposes of the research, the induction approach has been employed to conduct the probe. All important data have been initially collected through qualitative research tools, and then after analyzing the data, a model has been designed and a theory has been developed. Afterwards, the research hypotheses have been made based on the relationships among the variables of the research model. In this study, the main framework of the research has been created through concepts derived from knowledge-based companies through both a series of in-depth interview data, and an accurate study on literature about competitive advantage, dynamic capabilities, competencies, knowledge, knowledge management, knowledge-based strategies, and differentiation and so on. Meticulous studying preceding researches on inquiry topic causes a better perception to be provided about the research concepts. This process feeds and advances the research as a better inductive research.

Population Profile Data and Sampling Method
The sampling method of this research is nonprobability and non-random with a purpose in mind involves a sample of persons with the demonstrable experience and expertise in the research issue, consisting of knowledge, knowledge-centricity, knowledge-based products (services) and knowledge-based companies and related issue (expert sampling). It has been carried out in 30 active knowledge-based companies in the field of electronics and informatics which have settled in the science and technology park of 6 top universities of Iran. At first, 78 knowledge-based companies are identified as target sample of the research and are preliminary evaluated. After initial evaluation and contact with these companies, fifty-four of them show willing to cooperate. Finally, five companies are selected from each university and totally 30 senior managers are deeply interviewed twice within eight months. During this period of time, more than forty hours of the interviewee's voice are recorded and four hundred pages of documentation are collected. The studied companies' field of activities, the university associated with each of them and the number of open codes extracted from the deep interview of each interviewee has been presented in the Table 1.

Research Methods
This inquiry is based on an interpretive paradigm and a postpositive philosophy. The research has been established upon an applied and a developmental orientation. It has started with an inductive approach. The qualitative methods have been used in the first part of the probe to build a model and the quantitative methods have been employed to denote the statistics, test the model and present its goodness of fit. This study is primarily initiated with exploratory purpose through grounded theory strategy; then, it is continued with explanatory and descriptive purposes with survey and correlational research strategies.
In qualitative part, applying the grounded theory, the researchers are able to seek and extract the concepts from the obtained data through deep interviews with senior managers of studied knowledge-based companies and conceptualize the latent patterns and structures. In the first stage of GT, after several rounds of punctilious review of obtained data, 308 open codes are extracted. In the next step, these open codes 83 axial codes come from sorting and categorization of the research open codes. Through a detailed study on the research literature, eight new codes are added to the previous axial codes, and the total axial codes of the research increases to 91 codes. In the third step of coding, with high precision and review of codes, the axial codes are grouped into 12 selective codes as the main variables of the research.
In the paper, the axial codes and selective codes are respectively shown in 'B' and 'C'. These codes and their categorization have been represented in the following table.

Research Hypotheses
In this paper, we start the probe with this question that how a knowledge-based company is able to attain competitive advantage. Which tools, elements, factors, strategies and features are required that actively and competitively involve a knowledge-based company in markets to achieve the summit? To answer this multidimensional technical question, the qualitative part of the research is conducted and the initial model is designed based on the qualitative research findings. For testing the model which includes seventeen causal relations, the research hypotheses are formed. These hypotheses are as the following.  The initial extracted model of the research from the combination of GT method obtained codes and research literature in-depth study acquired codes is formed as follows, consisting of 12 constructs and 91 primary indicators.

The Technical Properties of Measuring Tools
The credibility of each research depends on credibility of data collection tools of that research. The researchers have evaluated the technical properties of the tools especially questionnaires with interviews used in this study to ensure the accuracy of the obtained results.

The Loading of Indicators
The value of Loadings is obtained through calculating the correlation of the indicators of a construct with that construct. If this value is equal to or higher than 0.4, it points out that the variance between a construct and its indicators is greater than the variance of measurement error and, therefore the reliability is acceptable for that measurement part of the model. Of course, some authors such as Rivard and Huff (1988) recommended the measure of 0.5 as the criterion for loadings.
The PLS has been used for initial evaluation of loadings of the measurement parts of the research model. In the beginning, after software calculation, the acquired loading value of 13 indicators is less than 0.5 and the rest are above the benchmark value. By removing indicators with low loading values from related constructs, loadings of residual indicators in the modified model are evaluated by the software again and finally, the loading values of 78 remaining indicators in the model are above 0.5 which represents acceptable reliability for all measurement parts of the model. The loadings of all indicators have been given in the table below. Note. Ex.: The excluded factor from the initial research model through covariance structure for model fitting.
In Table 5, the indicators of each construct (B) have been ranked based on the intensity of effect on the connected construct (C) in order to identify the most influential indicators of the model.

Path Analysis for Variables Causal Relationships
The important issue in fitting the final model of the research indispensable to be assessed is the efficacy and the significance of the causal relationship between the research variables. The criterion for measuring the causal relationship between constructs in the structural part of the model is the T-Value, and the criterion of efficacy is the standardized beta coefficient (β) or the path coefficient. If the T-Value of path between two constructs is greater than 1.96, it represents a relationship between constructs and thus confirms the hypothesis that one construct (variable) affects another construct (variable) in a 95% confidence interval.
The standardized beta coefficient (β) exposes that how much change it takes in dependent variable (effect) for one-unit change in independent variable (cause). In accordance with Table VII, all T-Values for the paths between two constructs are more than 1.96 and hence, all the relationships in the research model are significant and the hypotheses related to the causal relationships are accepted. The values of standardized beta coefficient (β) for the model paths show that in 15 paths, the efficacy is high; in path 11 (C10 -C11), it is average; and in path 14 (C6 -C4), it is low. branding and brand management, and also strategic agility for these knowledge-based companies. Branding and brand management have the most profound effect on differentiation strategies whereas strategic agility has the most intensive effect on knowledge-based strategies. As a conclusion, the most influential indicators related to model variables in order to gain competitive advantage are as follows.
(2) In core phenomenon, it should regard to (IV) Knowledge-centricity (KC) like for example spin-off knowledge-centricity (B90), knowledge-centricity emphasizing on R&D and economic activities along with R&D activities (B88), and knowledge-centricity with high-tech and new technology (B91). In comparison with other researches, it seems that the present study has more scrutiny, accuracy, depth and comprehensiveness and uses more influential and impressionable variables that can be used as an operational pattern for knowledge-based companies. This research has been conducted in the active knowledge-based companies in the field of electronics and informatics that can reveal an effective pattern for these companies. Considering the mentioned variables and indicators can lead such companies to reach the summit and gain a competitive advantage. For more convergence, it is suggested that the other researchers conduct similar studies in other knowledge-based fields.