This research is based on the earlier research of three literature avenues:
- entrepreneurship, venturing and real options,
- dynamic capabilities and adaptation and
- innovation management and measurement literature.
An increasing number of strategic management scholars describe today's industrial environment as complex and dynamic (e.g., Eisenhardt et al., 1998) and emphasize the necessity for the corporation to identify and exploit new business opportunities. Identifying and exploiting these opportunities involves the search for new organizational routines.
One perspective on venturing emphasizes value creation through stage decision and investment processes. Based on a real options logic (McGrath, 1997; Trigeorgis, 1996), value is created by making small investments early and postponing large scale investments until such point that uncertainty is resolved. Making a small investment early on essentially buys the corporation the right to abandon, redirect, or expand the investment at a later stage when more information about the prospects of the investment is at hand.
A second perspective puts this real option based venturing logic into question. Adner and Levinthal (2004) argue that such staged processes are bound to fail to create strategic value due to the ambiguity of decision stages and organizational decision making biases towards continuation of ventures.
Although the importance of different forms of venturing is increasingly recognized, managing corporate ventures is not well understood. In our research we will examine how the innovative activities like ventures needs to be managed successfully.
Dynamic capabilities stream provides a novel perspective on firm routines, learning, and corporate change. The literature suggests that instead of gradual improvement companies in highly fluid industries require an ability to constantly change and create new valuable resource combinations (Eisenhardt et al., 2000; Teece et al., 1997).
It is argued that dynamic capabilities are replacing traditional resources as the most important competitive factor in dynamic industries. It has been recently argued that all resources are dynamic, and that organizational capabilities change even without been acted on by dynamic capabilities (Teece, 1997). Organizational capabilities have a lifecycle, and capabilities continuously develop until they are finally abandoned or transformed.
In this perspective, dynamic capabilities are specific processes, which provide increase the development of other capabilities. Dynamic capabilities literature does not describe the factors that initiate or direct change in companies. In our research, we will examine how innovative activities contribute to dynamic capabilities of the firm.
Ramirez and Ruddle (2005) stated that there is not as much published research on innovation measurement than on the other themes related to innovations. Innovation measurement literature seems to be concentrated on managing portfolios and exploratory projects for innovation. Firms are widely using various measures for their innovation management (see e.g. Troy 2004).
However, the scarcity of published academic research related to innovation measurement, indicates that there is need for academic studies related to measurement of innovation and innovativeness. In our research we study how the innovativeness and innovation activities should be measured by firms.
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