Adaptive Capacity to Technological Change : A Microfoundational Approach

We take a microfoundational approach to understanding the origin of heterogeneity in firms’ capacity to adapt to technological change. We develop a computational model of individual-level learning in an organizational setting characterized by interdependence and ambiguity. The model leads to organizational outcomes with the canonical properties of routines: constancy, efficacy, and organizational memory. At the same time, the process generating these outcomes also produces heterogeneity in firms’ adaptive capacity to different types of technological change. An implication is that exploration policy in the formative period of routine development can influence a firm’s capacity to adapt to change in maturity. This points to a host of strategic trade-offs, not only between performance and adaptive capacity, but also between adaptive capacities to different forms of change