Influence of a Company’s Dynamic Capabilities on Its Innovation Capabilities
The advanced concepts of strategic and innovation management in the sphere of company dynamic and innovation capabilities, and achieving their mutual alignment and a synergy effect, are important elements in business today. This paper analyses the theory and empirically investigates the influence of a company’s dynamic capabilities on its innovation capabilities. A new multidimensional model of dynamic capabilities is presented, consisting of five factors appropriate to real time requirements, while innovation capabilities are considered pursuant to the official OECD and Eurostat standards. After examination of dynamic and innovation capabilities indicated their theoretical links, the empirical study testing the model and examining the influence of a company’s dynamic capabilities on its innovation capabilities showed significant results. In the study, a research model was posed to relate company dynamic and innovation capabilities. One side of the model features the variables that are the determinants of dynamic capabilities defined through their factors, while the other side features the determinants of innovation capabilities pursuant to the official standards. With regard to the research model, five hypotheses were set. The study was performed in late 2014 on a representative sample of large and very large Croatian enterprises with a minimum of 250 employees. The research instrument was a questionnaire administered to company top management. For both variables, the position of the company was tested in comparison to industry competitors, on a fivepoint scale. In order to test the hypotheses, correlation tests were performed to determine whether there is a correlation between each individual factor of company dynamic capabilities with the existence of its innovation capabilities, in line with the research model. The results indicate a strong correlation between a company’s possession of dynamic capabilities in terms of their factors, due to the new multi-dimensional model presented in this paper, with its possession of innovation capabilities. Based on the results, all five hypotheses were accepted. Ultimately, it was concluded that there is a strong association between the dynamic and innovation capabilities of a company.
[1] G. Hamel, Leading the Revolution, Boston: Harvard Business School
Press, 2000.
[2] G. Hamel and P. Skarzynski, “Innovation: the new route to wealth”,
Journal of Accountancy, no. 192/5, pp. 65-69, 2001.
[3] A. Aleksic, “Role of organizational design in the development of a
company’s organizational capabilities”, Doctoral Dissertation.
Zagreb:Faculty of Economics & Business, (in Croatian), 2012.
[4] G. Byrne, D. Lubowe and A. Blitz, “Driving operational innovation
using Lean Six Sigma”, IBM Institute for Business Value, vol. 01-07, pp.
1-16, 2012.
[5] R. Benson-Armer,S. S. Otto and G. Webster, “Building capabilities for
performance”,McKinsey & Company Insights, Jan. 2014, pp. 1-12.
[6] Ernst & Young, “Innovating for growth”,EY Innovation, no. 3, pp. 1-4,
2012.
[7] H. Mintzberg, B. Ahlstrand and J. Lampel, Management? It's Not What
You Think, Harlow: Pearson Education Limited, 2010.
[8] R. Leoncini, S. Montresor and G. Vertova, Dynamic Capabilities
Between Firm Organization and Local Development, Milano:
CERIS/DSE-CNR, 2005.
[9] D. J. Teece, G. Pisano and A. Shuen,. “Dynamic capabilities and
strategic management”,Strategic Management Journal, no. 18/7, pp.
509-533, 1997.
[10] O. Jones, A. MacPherson and D. Jayawarna D, “Learning to grow:
dynamic capabilities in new technology-based firms”, University of
Liverpool Management School Publication, no. 10, pp. 1-34, 2010.
[11] K. M. Eisenhardt and J. A. Martin, “Dynamic capabilities: what are
they?”,Strategic Management Journal, no. 21, pp. 1105–1112, 2000.
[12] A. Chang, P. C. Tsai and Y. Y. Lee, “Dynamic capabilities and
innovation performance of publishing firms in digital age”,National
ChengchiUniversity Publication, no. 12, pp. 1-18, 2012.
[13] K. Lin and K. Huang, “Dynamic capability and its effects on firm
performance”,American Journal of Applied Sciences, no. 9/1, pp. 107-
110, 2012.
[14] R. Pustkowski, J. Scott and J. Tesvic, “Why implementation matters”,
McKinsey & Company Insights, Aug. 2014, pp. 1-3.
[15] D. J. Teece, Dynamic Capabilities& Strategic Management –
Organizing for Innovation and Growth, Oxford: Oxford University
Press, 2009.
[16] D. J. Teece, “Capturing value from knowledge assets”,California
Management Review, no. 40/3, pp. 55-79, 1998.
[17] H. Itami and T. W. Roehl, Mobilizing Invisible Assets, Massachusetts:
Harvard University Press, 1987.
[18] K. M. Wiig, “The intelligent enterprise and knowledge
management”,Knowledge Research Institute articles,
http://www.krii.com/, 2000.
[19] C. Zott, “Dynamic capabilities and the emergence of intra-industry
differential firm performance: insights from a simulation study”,
Working paper, Fontainebleau, France: INSEAD Department of
Entrepreneurship, 2000.
[20] G. Hamel and C. K. Prahalad, Competing for the Future,
Boston:Harvard Business School Press, 1994.
[21] H. Mintzberg, B. Ahlstrand and J. Lampel, Strategy Safari – The
Complete Guide Through the Wilds of Strategic Management, Harlow:
Prentice Hall, 1998.
[22] N. Bontis and C. W. Choo,The Strategic Management of Intellectual
Capital and Organizational Knowledge: A Collection of Readings,
Oxford: Oxford University Press, 2012.
[23] P. A. Pavlou and O. A. El Sawy,“Understanding the elusive black box of
dynamic capabilities”,Decision Sciences, no. 42/1, pp. 239-273, 2011.
[24] R. M. Grant, “Toward a knowledge-based theory of the firm”,Strategic
Management Journal, no. 17, pp. 109-122, 1996.
[25] M. H. Zack, “Developing a knowledge strategy”,California
Management Review, no. 41/3, pp. 125-145, 1999.
[26] R. M. Grant,“The resource-based theory of competitive advantage:
implications for strategy formulation”,California Management Review,
Spring edition, no. 91, pp. 114-135, 1991.
[27] M. J. Hooper, D. Steeple and C. N. Winters, “Costing customer value:
an approach for the agile enterprise”, International Journal of
Operations & Production Management, no. 21-5/6, pp. 630-644, 2001.
[28] G. Westerman, P. Weill and M. McDonald, “Business agility and IT
capabilities”,MIT Sloan Management Research Briefings, no. 6/1, pp. 1-
4, 2006.
[29] Y. Y. Yusuf, M. Sarhadi and A. Gunasekaran, “Agile manufacturing: the
drivers, concepts and attributes”, Int. Journal of Production Economics,
no. 62, pp. 33-43, 1999.
[30] UK Department for Business, Innovation and Skills, Innovation Nation,
London: BIS, 2008.
[31] J. Fagerberg, D. C. Mowery and R. R. Nelson, The Oxford Handbook of
Innovation, Oxford: Oxford University Press, 2005.
[32] Commission Of The European Communities, Innovation Policy:
Updating the Union’s Approach in the Context of the Lisbon Strategy,
Brussels : Commission of the European Communities, 2003.
[33] P. F. Drucker, “The discipline of innovation”,Harvard Business Review,
no. 8, pp. 5-11, 2002.
[34] C. Schramm, Innovation Measurement – Tracking the State of
Innovation in the American Economy, Washington: USA Department of
Commerce, The Advisory Committee on Measuring Innovation in the
21st Century Economy, 2008.
[35] M. Rogers, “The definition and measurement of innovation”, Working
Paper, no. 10/98, Melbourne Institute of Applied Economic and Social
Research, University of Melbourne, 1998.
[36] P. F. Drucker, Managing in Turbulent Times, New York: Harper & Row
Publishers, 1980.
[37] P. F. Drucker, Managing for the Future – The 1990s and Beyond, New
York: Truman Talley Books, 1992.
[38] P. F. Drucker, Innovation and Entrepreneurship: Practice and
Principles, New York: Harper & Row Publishers, 1985
[39] B. Lawson and D. Samson, “Developing innovation capability in
organisations: a dynamic capabilities approach”, International Journal
of Innovation Management, no 5/3, pp. 377-400, 2001.
[40] D. Samson, Innovation for Business Success - Achieving a Systematic
Innovation Capability, Melbourne: University of Melbourne,
Department of Innovation, Industry, Science and Research, 2010.
[41] P. Gupta, Firm Specific Measures of Innovation,Chicago:Illinois
Institute of Technology, 2007.
[42] OECD Organisation for Economic Co-Operation And Development,
Oslo Manual - Guidelines for Collecting and Interpreting Innovation
Data, Paris: OECD Publications, 2005.
[43] OECD Organisation for Economic Co-Operation And Development,
Canberra Manual – Measurement of Human Resources Devoted to S&T,
Paris: OECD Publications, 1995.
[44] OECD Organisation for Economic Co-Operation And Development,
Frascati Manual - Proposed Standard Practice for Surveys on Research
and Experimental Development, Paris: OECD Publications, 2002.
[45] M. Saunila and J. Ukko, “A conceptual framework for the measurement
of innovation capability and its effects”,Measurement of innovation
capability, no. 7/41, pp. 355-375, 2012.
[46] I. Nonaka, “The knowledge-creating theory revisited: knowledge
creation as a synthesizing process”, Knowledge Management Research
& Practice, no. 1, pp. 2-10, 2003.
[47] H. Hollanders, “Measuring innovation - the European Innovation
Scoreboard”,UNU-MERIT Review, no. 10, pp. 27-40, 2010.
[48] R. S. Jonash and T. Sommerlate, “The innovation premium - capturing
the value of creativity”,Prism, no. 3, pp. 5-25, 1999.
[49] C. L. Wang and P. K. Ahmed, “Dynamic capabilities: a review and
research agenda”, The International Journal of Management
Reviews,no. 9/1, pp. 31-51, 2007.
[50] A. Protogerou, Y. Caloghirou and S. Lioukas, “Dynamic capabilities and
their indirect impact on firm performance”, DRUID Working Paper, no.
08-11, Danish Research Unit for Industrial Dynamics, 2008.
[51] J. P. Andrew, J. Manget, D. C. Michael, A. Taylor and
H.Zablit,Innovation 2010 – a return to prominence and the emergence
of a new world order, Boston: Boston Consulting Group, 2010.
[52] J. P. Andrew, K. Haanaes, D. C. Michael, H. L. Sirkin and A. Taylor,
Measuring innovation 2009 – the need for action, Boston: Boston
Consulting Group, 2009.
[53] M. Albaladejo and H. Romijn, “Determinants of innovation capability in
small UK firms: an empirical analysis”, Working Paper QEHWPS40,
Eindhoven University of Technology, 2000.
[54] Croatian Bureau of Statistics, “Persons in paid employment, by
activities, October 2014”, Croatian Bureau of Statistics release, No.
9.2.1/10., 2014.
[1] G. Hamel, Leading the Revolution, Boston: Harvard Business School
Press, 2000.
[2] G. Hamel and P. Skarzynski, “Innovation: the new route to wealth”,
Journal of Accountancy, no. 192/5, pp. 65-69, 2001.
[3] A. Aleksic, “Role of organizational design in the development of a
company’s organizational capabilities”, Doctoral Dissertation.
Zagreb:Faculty of Economics & Business, (in Croatian), 2012.
[4] G. Byrne, D. Lubowe and A. Blitz, “Driving operational innovation
using Lean Six Sigma”, IBM Institute for Business Value, vol. 01-07, pp.
1-16, 2012.
[5] R. Benson-Armer,S. S. Otto and G. Webster, “Building capabilities for
performance”,McKinsey & Company Insights, Jan. 2014, pp. 1-12.
[6] Ernst & Young, “Innovating for growth”,EY Innovation, no. 3, pp. 1-4,
2012.
[7] H. Mintzberg, B. Ahlstrand and J. Lampel, Management? It's Not What
You Think, Harlow: Pearson Education Limited, 2010.
[8] R. Leoncini, S. Montresor and G. Vertova, Dynamic Capabilities
Between Firm Organization and Local Development, Milano:
CERIS/DSE-CNR, 2005.
[9] D. J. Teece, G. Pisano and A. Shuen,. “Dynamic capabilities and
strategic management”,Strategic Management Journal, no. 18/7, pp.
509-533, 1997.
[10] O. Jones, A. MacPherson and D. Jayawarna D, “Learning to grow:
dynamic capabilities in new technology-based firms”, University of
Liverpool Management School Publication, no. 10, pp. 1-34, 2010.
[11] K. M. Eisenhardt and J. A. Martin, “Dynamic capabilities: what are
they?”,Strategic Management Journal, no. 21, pp. 1105–1112, 2000.
[12] A. Chang, P. C. Tsai and Y. Y. Lee, “Dynamic capabilities and
innovation performance of publishing firms in digital age”,National
ChengchiUniversity Publication, no. 12, pp. 1-18, 2012.
[13] K. Lin and K. Huang, “Dynamic capability and its effects on firm
performance”,American Journal of Applied Sciences, no. 9/1, pp. 107-
110, 2012.
[14] R. Pustkowski, J. Scott and J. Tesvic, “Why implementation matters”,
McKinsey & Company Insights, Aug. 2014, pp. 1-3.
[15] D. J. Teece, Dynamic Capabilities& Strategic Management –
Organizing for Innovation and Growth, Oxford: Oxford University
Press, 2009.
[16] D. J. Teece, “Capturing value from knowledge assets”,California
Management Review, no. 40/3, pp. 55-79, 1998.
[17] H. Itami and T. W. Roehl, Mobilizing Invisible Assets, Massachusetts:
Harvard University Press, 1987.
[18] K. M. Wiig, “The intelligent enterprise and knowledge
management”,Knowledge Research Institute articles,
http://www.krii.com/, 2000.
[19] C. Zott, “Dynamic capabilities and the emergence of intra-industry
differential firm performance: insights from a simulation study”,
Working paper, Fontainebleau, France: INSEAD Department of
Entrepreneurship, 2000.
[20] G. Hamel and C. K. Prahalad, Competing for the Future,
Boston:Harvard Business School Press, 1994.
[21] H. Mintzberg, B. Ahlstrand and J. Lampel, Strategy Safari – The
Complete Guide Through the Wilds of Strategic Management, Harlow:
Prentice Hall, 1998.
[22] N. Bontis and C. W. Choo,The Strategic Management of Intellectual
Capital and Organizational Knowledge: A Collection of Readings,
Oxford: Oxford University Press, 2012.
[23] P. A. Pavlou and O. A. El Sawy,“Understanding the elusive black box of
dynamic capabilities”,Decision Sciences, no. 42/1, pp. 239-273, 2011.
[24] R. M. Grant, “Toward a knowledge-based theory of the firm”,Strategic
Management Journal, no. 17, pp. 109-122, 1996.
[25] M. H. Zack, “Developing a knowledge strategy”,California
Management Review, no. 41/3, pp. 125-145, 1999.
[26] R. M. Grant,“The resource-based theory of competitive advantage:
implications for strategy formulation”,California Management Review,
Spring edition, no. 91, pp. 114-135, 1991.
[27] M. J. Hooper, D. Steeple and C. N. Winters, “Costing customer value:
an approach for the agile enterprise”, International Journal of
Operations & Production Management, no. 21-5/6, pp. 630-644, 2001.
[28] G. Westerman, P. Weill and M. McDonald, “Business agility and IT
capabilities”,MIT Sloan Management Research Briefings, no. 6/1, pp. 1-
4, 2006.
[29] Y. Y. Yusuf, M. Sarhadi and A. Gunasekaran, “Agile manufacturing: the
drivers, concepts and attributes”, Int. Journal of Production Economics,
no. 62, pp. 33-43, 1999.
[30] UK Department for Business, Innovation and Skills, Innovation Nation,
London: BIS, 2008.
[31] J. Fagerberg, D. C. Mowery and R. R. Nelson, The Oxford Handbook of
Innovation, Oxford: Oxford University Press, 2005.
[32] Commission Of The European Communities, Innovation Policy:
Updating the Union’s Approach in the Context of the Lisbon Strategy,
Brussels : Commission of the European Communities, 2003.
[33] P. F. Drucker, “The discipline of innovation”,Harvard Business Review,
no. 8, pp. 5-11, 2002.
[34] C. Schramm, Innovation Measurement – Tracking the State of
Innovation in the American Economy, Washington: USA Department of
Commerce, The Advisory Committee on Measuring Innovation in the
21st Century Economy, 2008.
[35] M. Rogers, “The definition and measurement of innovation”, Working
Paper, no. 10/98, Melbourne Institute of Applied Economic and Social
Research, University of Melbourne, 1998.
[36] P. F. Drucker, Managing in Turbulent Times, New York: Harper & Row
Publishers, 1980.
[37] P. F. Drucker, Managing for the Future – The 1990s and Beyond, New
York: Truman Talley Books, 1992.
[38] P. F. Drucker, Innovation and Entrepreneurship: Practice and
Principles, New York: Harper & Row Publishers, 1985
[39] B. Lawson and D. Samson, “Developing innovation capability in
organisations: a dynamic capabilities approach”, International Journal
of Innovation Management, no 5/3, pp. 377-400, 2001.
[40] D. Samson, Innovation for Business Success - Achieving a Systematic
Innovation Capability, Melbourne: University of Melbourne,
Department of Innovation, Industry, Science and Research, 2010.
[41] P. Gupta, Firm Specific Measures of Innovation,Chicago:Illinois
Institute of Technology, 2007.
[42] OECD Organisation for Economic Co-Operation And Development,
Oslo Manual - Guidelines for Collecting and Interpreting Innovation
Data, Paris: OECD Publications, 2005.
[43] OECD Organisation for Economic Co-Operation And Development,
Canberra Manual – Measurement of Human Resources Devoted to S&T,
Paris: OECD Publications, 1995.
[44] OECD Organisation for Economic Co-Operation And Development,
Frascati Manual - Proposed Standard Practice for Surveys on Research
and Experimental Development, Paris: OECD Publications, 2002.
[45] M. Saunila and J. Ukko, “A conceptual framework for the measurement
of innovation capability and its effects”,Measurement of innovation
capability, no. 7/41, pp. 355-375, 2012.
[46] I. Nonaka, “The knowledge-creating theory revisited: knowledge
creation as a synthesizing process”, Knowledge Management Research
& Practice, no. 1, pp. 2-10, 2003.
[47] H. Hollanders, “Measuring innovation - the European Innovation
Scoreboard”,UNU-MERIT Review, no. 10, pp. 27-40, 2010.
[48] R. S. Jonash and T. Sommerlate, “The innovation premium - capturing
the value of creativity”,Prism, no. 3, pp. 5-25, 1999.
[49] C. L. Wang and P. K. Ahmed, “Dynamic capabilities: a review and
research agenda”, The International Journal of Management
Reviews,no. 9/1, pp. 31-51, 2007.
[50] A. Protogerou, Y. Caloghirou and S. Lioukas, “Dynamic capabilities and
their indirect impact on firm performance”, DRUID Working Paper, no.
08-11, Danish Research Unit for Industrial Dynamics, 2008.
[51] J. P. Andrew, J. Manget, D. C. Michael, A. Taylor and
H.Zablit,Innovation 2010 – a return to prominence and the emergence
of a new world order, Boston: Boston Consulting Group, 2010.
[52] J. P. Andrew, K. Haanaes, D. C. Michael, H. L. Sirkin and A. Taylor,
Measuring innovation 2009 – the need for action, Boston: Boston
Consulting Group, 2009.
[53] M. Albaladejo and H. Romijn, “Determinants of innovation capability in
small UK firms: an empirical analysis”, Working Paper QEHWPS40,
Eindhoven University of Technology, 2000.
[54] Croatian Bureau of Statistics, “Persons in paid employment, by
activities, October 2014”, Croatian Bureau of Statistics release, No.
9.2.1/10., 2014.
@article{"International Journal of Business, Human and Social Sciences:73037", author = "Lovorka Galetic and Zeljko Vukelic", title = "Influence of a Company’s Dynamic Capabilities on Its Innovation Capabilities", abstract = "The advanced concepts of strategic and innovation management in the sphere of company dynamic and innovation capabilities, and achieving their mutual alignment and a synergy effect, are important elements in business today. This paper analyses the theory and empirically investigates the influence of a company’s dynamic capabilities on its innovation capabilities. A new multidimensional model of dynamic capabilities is presented, consisting of five factors appropriate to real time requirements, while innovation capabilities are considered pursuant to the official OECD and Eurostat standards. After examination of dynamic and innovation capabilities indicated their theoretical links, the empirical study testing the model and examining the influence of a company’s dynamic capabilities on its innovation capabilities showed significant results. In the study, a research model was posed to relate company dynamic and innovation capabilities. One side of the model features the variables that are the determinants of dynamic capabilities defined through their factors, while the other side features the determinants of innovation capabilities pursuant to the official standards. With regard to the research model, five hypotheses were set. The study was performed in late 2014 on a representative sample of large and very large Croatian enterprises with a minimum of 250 employees. The research instrument was a questionnaire administered to company top management. For both variables, the position of the company was tested in comparison to industry competitors, on a fivepoint scale. In order to test the hypotheses, correlation tests were performed to determine whether there is a correlation between each individual factor of company dynamic capabilities with the existence of its innovation capabilities, in line with the research model. The results indicate a strong correlation between a company’s possession of dynamic capabilities in terms of their factors, due to the new multi-dimensional model presented in this paper, with its possession of innovation capabilities. Based on the results, all five hypotheses were accepted. Ultimately, it was concluded that there is a strong association between the dynamic and innovation capabilities of a company. ", keywords = "Dynamic capabilities, innovation capabilities,
competitive advantage, business results. ", volume = "10", number = "5", pages = "1671-9", }
