Explaining Organic Growth Performance: Why Dynamic Capabilities Need Strategy Guidance

George Day, Geoffrey T. Boisi Professor Emeritus, The Wharton School

in The Oxford Handbook of Dynamic Capabilities, David J. Teece and Sohvi Heaton, Ed.

Abstract: Why are some firms consistently able to grow faster than their rivals in the same industry? We employ dynamic capabilities theory to show that organic growth leaders excel because they have innovation prowess. Their prowess is gained by combining discipline in their growth-seeking activities with an organizational ability to innovate. Empirical indicators of these constructs were assessed by a sample of senior leaders in 168 companies. We found that innovation ability (comprising the interconnected elements of innovation culture, innovation capabilities, and how the firm is organized to enable innovation) explained most of the performance differences between growth leaders, average performers, and growth laggards. However, it is the interaction of innovation ability and discipline in pursuing the growth strategy that explains why growth leaders outperform the average organic growth rate of their industry.

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Michelle Eckert is Marketing and Communications Coordinator for the Mack Institute, where she works to engage students, researchers, and corporate partners in opportunities for collaboration. Michelle received her B.A. in Art from Valparaiso University in 2007. Her background includes two AmeriCorps terms of service working to teach mathematics, computer literacy, and job readiness skills to out-of-school youth in Philadelphia, focusing particularly on promoting access to post-secondary education.