Innovation Capability Reconfiguration Growth And Substitution

Since carrying out open policy, China’s economy has experienced a rapid growth. However, China’s economy is investment driven rather than innovation driven. Today, China is challenged by the sustainable development:how to cross the middle-income trap and implement innovation driven strategy. The main reason for slowdown in China’s GDP growth is that China relayed too much on foreign investment. And it results in a shortage of independent innovation capability. To solve this problem, we should realize the importance of developing firms’innovation capabilities. However, how to reconfigure firms’innovative capability is not clear. This research addresses this issue.The second chapter offers a comprehensive review of research work on firms’ innovation capability. It re-identifies the concept, characteristics and measurement of firms’innovation capability and summarized the individual-level and firm-level antecedents as well as their mechanisms.The third chapter uses a longitudinal case study of Sunyard to understand the developmental processes and microfoundations that lead to innovation capability reconfigurations. Firstly, similar and successful experiences are the antecedents of the formulation of innovation capabilities. Secondly, supplement and variation of organizational routines are the dual processes of capability reconfiguration. Lastly, manager’s dominant logic is the microfoundations of such capability reconfiguration. For example, manager’s resource commitment is the microfoundations of organizational structural inertia; manager’s commitment escalating is the microfoundations of organizational rigidities; manager’s self-justification is the microfoundations of organizational reconfiguration.The fourth chapter applies system dynamics analysis to investigate how firms identify and solve the competency trap by linking performance feedback theory and capability reconfiguration theory. This chapter provides an insightful suggestion to understand the microfoundations of firms’innovation capabilities. Compared to the dominant logic in strategic management arears that competitive advantage comes from managerial foresight, the main theoretical contribution of this chapter is to propose a backward-looking and problem-oriented process of capability reconfiguration, which is more consistent with the hypothesis of managerial bounded rationality. In other words, it is goal-driven decision-making process that can be seen as microfoundations of the source of competitive advantage:a reasonable goal-driven search behavior not only can help firms involve with rent appropriation process as much as possible, but also helps managers to identify when to engage in rent generation process by selecting variation of the organizational routines in order to overcome competency trap.The fifth chapter answers when firms are likely to increase strategic investment for reconfiguring innovation capability. To investigate the behavioral explanations for the determinants of strategic investment, this chapter examines the impact of social performance feedback on firms’strategic investment. I argue that performance shortfalls (when it is below the social aspiration levels) will increase the likelihood of strategic investment. Moreover, this chapter also proposes a contingency view regarding strategic investment following social performance shortfalls. First, I argue that firms, where CEO duality is present, are deficiency in board monitoring, and hence that poor performance constrains strategic investment at these firms. Second, I suggest that firms with more female board representation are more likely to yield comprehensive discussion that may decrease timely response, and hence that it is difficult for such firms in catalyzing strategic investment. Third, I posit that firms with high analyst stock recommendations are the most likely to face institutional pressures and difficulties in maintaining high performance, and hence that they are likely to respond to these pressures and difficulties with attempts to regain legitimacy by increasing strategic investments. Based on panel data analysis of 563 Chinese manufacturing firms, our results generally support these hypotheses, although the main effect is weaker. The findings contribute to the behavioral theory of the firm and to several perspectives in organization theory more broadly.The last chapter summarizes the content of this thesis and offers some directions for further research.