Chapter 3: The Rules And Resources That Generate The Dynamic Capability For Sustained Product Innovation

By contrasting non-innovative and innovative organizations in mature industries, we present empirically grounded theory that explains how the dynamic capability for sustained product innovation works. Complexity and social theories suggest that complex activity like sustained product innovation can be generated by a few simple rules and resources. We find three sets of rules and resources that work with “best practices” to generate sustained innovation: looking for new opportunities, which provides the resource of many viable options; sharing responsibility for the entire project, which provides time and attention; and valuing knowledge for its own sake, which provides the power to define problems. These innovative rules and resources are absent in non-innovative organizations. Instead, we find alternate rules and resources that generate the incapability for innovation: eliminating problems quickly, which provides the resource of limiting others’ actions; separating responsibility, which provides control over one’s own domain; and valuing results, which provides control over applying expertise. We explain why the non-innovative rules and resources preclude effective innovation, and illustrate how the innovative ones create a fundamentally different way to manage and control work. The paper refines the dynamic capability for innovation, develops new insights into the structuring of everyday innovation activities, and suggests propositions to push theory and practice forward.