Building Dynamic Capabilities: Innovation Driven by Individual, Firm, and Network Level Effects

Organization Science, Vol. 18, 2007

Posted: 13 Oct 2006

See all articles by Frank T. Rothaermel

Frank T. Rothaermel

Georgia Institute of Technology; Georgia Institute of Technology - Scheller College of Business

Drew Hess

University of Virginia - McIntire School of Commerce

Abstract

Following the dynamic capabilities perspective, we suggest that antecedents to innovation can be found at the individual, firm, and network level. Thus, we challenge two assumptions common in prior research: (1) that significant variance exists at the focal level of analysis, while other levels of analysis are assumed to be homogeneous, and (2) that the focal level of analysis is independent from other levels of analysis. Accordingly, we advance a set of hypotheses to simultaneously assess the direct effects of antecedents at the individual, firm, and network level on innovation output. We then investigate whether a firm's antecedents to innovation lie across different levels. To accomplish this, we propose two competing interaction hypotheses. We juxtapose the hypothesis that the individual, firm, and network-level antecedents to innovation are substitutes versus the proposition that these innovation mechanisms are complements. We test our multi-level theoretical model using an unusually comprehensive and detailed panel dataset that documents the innovation attempts of global pharmaceutical companies within biotechnology over a 22-year time period (1980-2001). We find evidence that the antecedents to innovation lie across different levels of analysis and can have compensating or reinforcing effects on firm-level innovative output.

Keywords: dynamic capabilities, organizational learning, innovation, multi-level theory, longitudinal panel data, pharmaceutical and biotechnology industries

JEL Classification: C23, D21, L22, M13, O31, O32, O33

Suggested Citation

Rothaermel, Frank T. and Hess, Andrew M., Building Dynamic Capabilities: Innovation Driven by Individual, Firm, and Network Level Effects. Organization Science, Vol. 18, 2007, Available at SSRN: https://ssrn.com/abstract=937126

Frank T. Rothaermel (Contact Author)

Georgia Institute of Technology ( email )

800 West Peachtree Street NW
Atlanta, GA 30308-1149
United States
404-385-5108 (Phone)
404-894-6030 (Fax)

HOME PAGE: http://mgt.gatech.edu/rothaermel

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Andrew M. Hess

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States

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