Impact of Dynamic Capability on Innovation, Value Creation and Industry Leadership

Dynamic capability is a product of the extension of the Research-Based View (RBV) to dynamic environments, and refers to the ability of the firm to reconfigure its resources to address rapidly changing environments. Most research literature on dynamic capability has focused on its general applicability to innovation. Dynamic capability is based on firm resources, which could be people resources and/or material resources. Product innovation primarily requires material resources and capital investment to be successful, while process innovation predominantly requires people resources to be successful. The authors argue based on extant literature that while material resource-based dynamic capability will positively impact product innovation, people resource-based dynamic capability (especially managerial resource-based) will positively impact process innovation. This conceptual paper presents a research model, and hypothesizes about the strength and nature of linkages between different types of dynamic capabilities and different forms of innovations, while ultimately tying these to value creation and industry leadership