Building Dynamic Capabilities in Rapid Innovation-based Industries
Edited by Stuart Wall, Carsten Zimmermann, Ronald Klingebiel and Dieter Lange
Chapter 2: The Impact of Opposing Governance Systems on Radical innovation: Insights from the Dynamic Capabilities View
Michael Horn1 and Carsten Zimmermann2 ABSTRACT We critically examine the influence of conflicting firm-level corporate governance systems on the development of dynamic capabilities and their association with radical innovation. In contrast to linear models within the theories of innovation, case study evidence from the pharmaceutical industry suggests that architectural organization, integration, and reconfiguration capabilities, involving both internal and external resource routines, are critical for the development of radical innovation. We incorporate recent theoretical advancements within the relevant body of strategy research, thereby seeking to remedy the perceived imbalance towards uni-dimensional innovation models at the expense of more contextual characteristics in the area of firm-level corporate governance systems. Our contribution is twofold: first, we show how different firm-level corporate governance systems in the area of incentive systems are associated with integration, reconfiguration and architectural organization routines. Second, we argue that more ‘American’ firm-level corporate governance systems and the ‘uncertainty’ associated with them, drive, rather than hinder, the emergence of relatively simple routines underlying radical innovation. INTRODUCTION The question of how innovation systems give rise to innovative capabilities in different industries has been a highly contentious issue in advanced industrial economies throughout the 1990s (Hollingsworth 1997; Whitley 2000). In particular, it has been argued that some firms seem to be more radical in their innovation performance, i.e. outperforming in high-technology 33 34 Strategic reconfigurations industries where technological paradigms are shifting. In contrast, other firms are more successful at incremental innovation, outperforming in more established industries with more stable technological paradigms (Streeck 1992;...
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