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Capital investments, capabilities, and uncertainty An empirical analysis of incumbent adaptation to radical technological change

Capital investments, capabilities, and uncertainty An empirical analysis of incumbent adaptation... Purpose – The purpose of this paper is to empirically examine the impact of capital investments on new capabilities development during competence‐destroying change. The moderating role of uncertainty is also explored. Design/methodology/approach – This paper utilizes two distinct but related research streams; the literature on organizational capabilities and real options, to build the theory and hypotheses. Findings – Data from a sample of 767 alliances between incumbent pharmaceutical firms and new biotechnology firms reveal that incumbent firms who increase capital investments in emerging technological domains despite the uncertainty present in them, are more likely to develop new products based on emerging technology. Research limitations/implications – The results encourage future research on the nexus of managerial cognition, capital investments, uncertainty and the adaptation process. Originality/value – Extant literature implicitly suggests that capital investments are critical for developing new capabilities; yet no prior study has addressed the relationship between capital investments and new capabilities development during competence‐destroying change. This paper addresses this gap in the literature. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Strategy and Management Emerald Publishing

Capital investments, capabilities, and uncertainty An empirical analysis of incumbent adaptation to radical technological change

Journal of Strategy and Management , Volume 3 (2): 23 – May 18, 2010

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References (94)

Publisher
Emerald Publishing
Copyright
Copyright © 2010 Emerald Group Publishing Limited. All rights reserved.
ISSN
1755-425X
DOI
10.1108/17554251011041788
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to empirically examine the impact of capital investments on new capabilities development during competence‐destroying change. The moderating role of uncertainty is also explored. Design/methodology/approach – This paper utilizes two distinct but related research streams; the literature on organizational capabilities and real options, to build the theory and hypotheses. Findings – Data from a sample of 767 alliances between incumbent pharmaceutical firms and new biotechnology firms reveal that incumbent firms who increase capital investments in emerging technological domains despite the uncertainty present in them, are more likely to develop new products based on emerging technology. Research limitations/implications – The results encourage future research on the nexus of managerial cognition, capital investments, uncertainty and the adaptation process. Originality/value – Extant literature implicitly suggests that capital investments are critical for developing new capabilities; yet no prior study has addressed the relationship between capital investments and new capabilities development during competence‐destroying change. This paper addresses this gap in the literature.

Journal

Journal of Strategy and ManagementEmerald Publishing

Published: May 18, 2010

Keywords: Investments; Change management; Uncertainty management; Organizational structures

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