Dynamic capabilities lead to innovation performance – but what about profits?

Photo: Eivind Sætre – norden.org

ISE researcher Niels Nolsøe Grünbaum together with Marianne Stenger, PhD and associate professor from University of Southern Denmark, published an article called “Dynamic Capabilities: Do They Lead to Innovation Performance and Profitability?” in the current issue of The IUP Journal of Business Strategy.

The article describes a new study that examines the relationship between dynamic capabilities, innovation performance and profitability of small and medium-sized manufacturing enterprises operating in volatile environments – an under-researched area in the growing body of literature on dynamic capabilities and innovation management.

In the study, a multi-case study design was utilized. The findings reveal, as expected, a positive relationship between dynamic capabilities and innovation performance in the case companies. However, it was not possible to establish a positive relationship between innovation performance and profitability, or to find any positive relationship between dynamic capabilities and profitability.

High product quality – lack of systematism
The study’s main concern is a better understanding of the realm of Small and Medium-sized Enterprises’ (SME) internal and external business atmosphere.

The sphere of these business atmospheres is dominated on the positive side by high product quality, high product innovation, high flexibility, a very low return rate of failed products, a flat organization structure and an involving style of leadership.

On the opposite and negative pole, the study found that it was dominated by a lack of systematism, assessment, monitoring, marketing speculations and feasibility calculation. Furthermore, the study found that the sphere was dictated by asymmetric supplier-customer relationships and negotiation power leading, among other possible factors, to meager profitability.

The full article can be purchased via this link: IUP Publications Online 

For more information, please contact Niels Nolsøe Grünbaum at grunbaum@ruc.dk.