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Ali Reza Javanmardi Kashan Thesis Strategic Capability Development: A multi‐ level case study of the role of knowledge integration within product innovation Alireza Javanmardi Kashan Supervisors: Dr. Kavoos Mohannak Prof. Robyn Keast Queensland University of Technology QUEENSLAND UNIVERSITY OF TECHNOLOGY Strategic Capability Development: A multi-level case study of the role of knowledge integration within product innovation by Alireza Javanmardi Kashan Principal supervisor: Dr. Kavoos Mohannak Associate supervisor: Prof. Robyn Keast A thesis submitted in partial fulfilment for the degree of Doctor of Philosophy in the QUT BUSINESS SCHOOL SCHOOL OF MANAGEMENT March 2014 KEY WORDS Ambidexterity, Dynamic Capability, Strategic Fit Theory, Knowledge Integration, Product Innovation, Strategy Content, Strategy Process, Micro Perspective, Multi- level Analysis, Embedded Case Study, Iranian Auto Industry. i ABSTRACT Firms’ adaptation with environmental changes is crucial for survival of the firms, especially in today’s hyper-competitive environment. Understanding how competitive advantage is maintained or regained through capability development can help to explain the firm-environment relationship. Previous research has focussed on either the content or the process of capability development. The content view, based on the ambidexterity perspective, looks at the creation of competitive advantage with a market focus. While the process view, based on a dynamic capability perspective, is concerned with existing organisational capabilities. These two views provide only a partial explanation of how to build competitive advantage. Bringing these two perspectives together can provide a more comprehensive explanation for how competitive advantage is created. Despite their differences, both content and process studies agree on the importance of two components of organisational capability development: knowledge integration and product innovation. This thesis takes product innovation as the context for re-examining the role of knowledge integration in the content and process of capability development. The aim of this study is to conceptualise Strategic Capability Development as a development of an organisation’s existing capability in line with the capability required by the market. In order to integrate the content and process of capability development, it is necessary to develop a conceptual framework which combines the perspectives of ambidexterity and dynamic capability. With this framework, it is possible to show that there are two interrelated dynamics of knowledge integration: (1) a reciprocal relationship between knowledge integration and capability development; and (2) development of existing capabilities. This research focuses on the reciprocity between capability development and knowledge integration with development of existing capabilities towards Strategic Capability Development, within the context of product innovation. This study adopts a critical realist approach for studying how managing knowledge integration impacts on the development of competitive capability. At project level, the research focuses on the reciprocity between capability development and knowledge integration, and at the organisational level the focus is on the development of existing capabilities. A case study method is used ii here for theory elaboration and to encompass both levels of analysis. More specifically, an embedded case study design is adopted to undertake comparison of product innovation projects in the Iran Khodro Company (IKCO). This firm is an exemplar of Strategic Capability Development within the Iranian Auto industry. The firm’s strategic capability matured over the course of the four product innovation projects Analysis of the project level findings identified the generative mechanisms upon which knowledge integration across different product innovation projects has formed explorative and exploitative capability development. The organisational level findings revealed the factors influencing/influenced by development of existing capabilities. This study proposes that the content of capability development includes the creation of architectural knowledge and development of open innovation capacity, whereas the process of capability development includes the emergence of modular capability architecture. The key theoretical contribution of this thesis is the development of an interpretive model for conceptualising Strategic Capability Development. The model provides a sound foundation for future empirical research. There are practical implications of this study for firms to better manage integration across a sequence of product innovation projects for building strategic capability. iii TABLE OF CONTENTS KEY WORDS i ABSTRACT ii LIST OF FIGURES ix LIST OF TABLES xi STATE MENT OF ORIGINAL AUTHORSHIP xii ACKNOWLEDEGMENTS xiii 1. INTRODUCTION ............................................................................................................. 1 1.1. Research problem and study background ................................................................... 1 1.2. Research objectives ..................................................................................................... 5 1.3. Understanding Strategic Capability Development and developing a research agenda ................................................................................................................................. 6 1.3.1. Insights from literature ......................................................................................... 6 1.3.2. Research questions ............................................................................................... 9 1.3.3. Setting and context of research .......................................................................... 12 1.3.4. Studying organisational capability development ............................................... 14 1.4. Scope of study ........................................................................................................... 17 1.5. Thesis Structure .......................................................................................................... 17 2. LITERATURE REVIEW AND THEORETICAL FRAMEWORK .......................... 21 2.1. Research Background………………………………………………………………22 2.2. Literature review ....................................................................................................... 28 2.2.1. Dynamic capability ............................................................................................ 28 2.2.2. Ambidexterity .................................................................................................... 34 iv 2.2.3. Knowledge integration ....................................................................................... 40 2.2.4. Product innovation ............................................................................................. 47 2.2.5. Gaps within literature ......................................................................................... 57 2.2.6. Summary of literature review............................................................................. 60 2.3. Theoretical analysis and developing a research agenda ............................................ 65 2.3.1. Critical analysis of the literature and development of the key Research Questions ........................................................................................................... 67 2.3.2. Conceptual framework and formulation of Sub-Research Questions ................ 67 2.4. Chapter summary....................................................................................................... 73 3. RESEARCH DESIGN & METHODOLOGY .............................................................. 75 3.1. Theoretical perspective .............................................................................................. 75 3.1.1. Critical analysis of the methodology.................................................................. 76 3.1.2. Approach to methodology .................................................................................. 82 3.2. Research design ......................................................................................................... 85 3.2.1. Justification for the research method ................................................................. 85 3.2.2. Case study design and research questions .......................................................... 86 3.2.3. Research setting ................................................................................................. 91 Case company selection ................................................................................................ 91 Case projects selection .................................................................................................. 91 3.3. Research method ................................................................................................. 108 3.3.1. Data collection ................................................................................................. 108 Information sources ..................................................................................................... 108 Establishing contacts in the case company ................................................................. 110 Interview procedure .................................................................................................... 110 Second round of interviews and secondary sources .................................................... 122 3.3.2 Data
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