Capability interactions and adaptation to demand‐side change

Tang Wang, Vikas A. Aggarwal and Brian Wu

Strategic Management Journal, 2020, vol. 41, issue 9, 1595-1627

Abstract: Research summary We examine how interactions among a firm's capabilities influence the extent and direction of firm adaptation under conditions of demand‐side change. Our empirical context is the U.S. defense industry, within which we study firms receiving defense‐related Small Business Innovation Research (SBIR) awards around September 11, 2001, an event which constituted an exogenous demand‐side shock in which technology‐related preferences of customers were reshuffled. We find that under demand‐side change, preexisting customer relationships have a double‐edged effect: They facilitate “extension‐based” adaptation when interacted with technology capabilities experiencing a decline in customer preferences, and they hinder “novelty‐based” adaptation when interacted with technology capabilities experiencing an increase in such preferences. We also find that both types of technological capabilities together facilitate adaptation along the extension and novelty paths. Managerial summary Demand‐side change, in which customer preferences for particular technologies are reshuffled, occurs in many industry settings. A deeper understanding of the factors shaping firm adaptation under this form of change can influence managers' decisions to implement strategies to plan for and react to such change. Using a sample of firms receiving defense‐related SBIR awards around September 11, 2001, we show that the customer relationships a firm develops prior to demand‐side change can have a double‐edged effect on firm adaptation. Such relationships facilitate “extension‐based” adaptation when combined with technology capabilities declining in customer preferences and hinder “novelty‐based” adaptation when combined with technology capabilities increasing in customer preferences. In addition, the combination of the two technological capability types facilitates adaptation along both paths.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://doi.org/10.1002/smj.3137

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:stratm:v:41:y:2020:i:9:p:1595-1627

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0143-2095

Access Statistics for this article

More articles in Strategic Management Journal from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().