This paper aims to offer a conceptualization of how and why corporate level strategic change may build on historical differentiation at business unit level.
Methodologically, an historical case study of Nokia Corporation's drastic business model transformation between the years 1987 and 1995 is reported.
The conceptual and historical work results in a process model of business model change, demonstrating how central business units feed strategic alternatives and capabilities to the corporate‐level transformation process.
The results highlight the importance of corporate level “market mechanisms' that allow promising strategic alternatives to emerge and select out inferior options. In this process, a key mechanism is the exchange of executives and cognitive mindsets between business units and corporate headquarters (CHQ).
The reported research offers an original contribution by showing the dynamic interplay of cognitive and organizational change processes, and highlighting the importance of building on existing capabilities and competencies despite the pressure to demonstrate strong turnaround activities.
