Managing firms’ innovation capabilities through strategically aligning combinative IT and dynamic capabilities

Abstract

This study explores how firms’ incremental and radical innovation capabilities can be explained from technological and dynamic capabilities and specifically their combinative alignment. We propose a strategic alignment model—grounded on dynamic capabilities and modular systems theory—and examine to what extent strategic alignment affects a firm’s innovation capabilities and how this potentially can be enhanced in practice. We then empirically validate our main proposition using regression analyses on a sample of 322 international firms. Results suggest that there is a positive relationship between a firm’s degree of alignment and innovation capabilities. Strategic alignment can, therefore, be seen as an important condition that drives sustainable advantage in constantly changing environments. The proposed model helps firms assess and improve their level of IT flexibility, dynamic capabilities, absorptive capacity and their interdependent synchronization. Results are discussed and theoretical and practical implications are highlighted. We conclude with suggestions for future research.