Developing Innovation Capability in Organisations: a Dynamic Capabilities Approach

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International Journal of Innovation Management
Vol. 5, No. 3 (September 2001) pp. 377–400
© Imperial College Press

DEVELOPING INNOVATION CAPABILITY
IN ORGANISATIONS: A DYNAMIC
CAPABILITIES APPROACH

BENN LAWSON
Department of Accounting, The University of Melbourne
Victoria, 3010, Australia
e-mail: blawson@unimelb.edu.au

DANNY SAMSON
Department of Management, The University of Melbourne
Victoria, 3010, Australia
e-mail: d.samson@unimelb.edu.au
Received 1 February 2001
Revised 18 August 2001
Accepted 21 August 2001
This paper draws together knowledge from a variety of fields to propose that innovation management can be viewed as a form of organisational capability. Excellent companies invest and nurture this capability, from which they execute effective innovation processes, leading to innovations in new product, services and processes, and superior business performance results. An extensive review of the literature on innovation management, along with a case study of Cisco Systems, develops a conceptual model of the firm as an innovation engine. This new operating model sees substantial investment in innovation capability as the primary engine for wealth creation, rather than the possession of physical assets. Building on the dynamic capabilities literature, an “innovation capability” construct is proposed with seven elements. These are vision and strategy, harnessing the competence base, organisational intelligence, creativity and idea management, organisational structures and systems, culture and climate, and management of technology.

Keywords: innovation, dynamic capabilities, Cisco, new technology

Introduction
Ask many of today’s CEOs and they are likely to tell you that the ability to develop new ideas and innovations is one of the top priorities of their organisations (Porter, 377

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Stern & Council on Competitiveness, 1999). The emergence of the knowledge economy, intense global competition and considerable technological advance has seen innovation become increasingly central to competitiveness. Innovation is the mechanism by which organisations produce the new products, processes and systems required for adapting to changing markets, technologies and modes of competition (D’Aveni, 1994; Dougherty & Hardy, 1996; Utterback, 1994). As companies become increasingly focused on innovation, the performance hurdles for success have increased considerably. Escalating levels of commitment to innovation are required simply to stay in the same place, much less improve competitive position. However, managing the complex and risky process of innovation has been problematic and fraught with difficulty (Kanter, 1989; Quinn, 1985). This paper provides a framework for managers showing that the process of innovation can be managed, systematised and replicated within organisations. Based on an extensive review of the innovation management literature, and supported by a single case study of Cisco Systems, a model of innovation capability is developed. We show that successful innovation contains core elements and processes, regardless of the industry or firm. High performing innovators are able to harness this innovation meta-capability to achieve outstanding performance.

Review of the Literature
The practical concerns and demands of managers have often driven research into organisational innovation. Consequently, predominantly normative theories have been advanced offering prescriptions for improving the innovation outcomes of firms (i.e. the number of innovations developed). However, despite an extensive literature and the depth and extent of empirical research, a dominant theory, or in fact, a consistent body of theory remains elusive (Fiol, 1996; Wolfe, 1994). Wolfe (1994: 405) argues, “the most consistent theme found in the organisational innovation literature is that its research results have been inconsistent”. Many models of...
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