Explicating dynamic capabilities for innovation: An employee perspective

Innovation is readily recognized as a key basis for competitive advantage, and dynamic capabilities the means by which organizations can achieve this. Yet while the significance of dynamic capabilities is well recognised, there is less understanding of the mechanisms of how dynamic capabilities are created and actually operate. In addressing this issue, this study focuses on the internal dynamics of innovation in organisations. In particular, drawing on employee insights from a nationally representative survey of over 5,000 employees the study explores the role of innovative climate as a critical intermediary variable between employee perception's of innovative strategies and innovation outcomes. The study finds that a climate for creativity is indeed a key factor and micro-foundation in building dynamic capability for innovation. This contributes to the dynamic capabilities literature by explicating the source and basis of capabilities in the behaviours and intentions of employees, thereby offer a balance to managerialist accounts. The study also aligns with the emerging literature on micro-foundations which suggests that the basis for understanding macro-level concepts such as dynamic capabilities is likely to be found embeded at deeper levels within the organisation. As such, this holds much practical relevance as proximate variables are likely to be much more amenable to purposeful intervention and change.