Current research posits that, with the passage of time, organizations tend to lose their ability to innovate. This process takes place as maturing entities become a guardian of the dominant social paradigms. As an integral element of the prevalent “logic of appropriateness,” maturing firms become complacent, make safer choices, and thus slowly become less responsive to external stimuli. This evolution of an organization’s logic may lead to their demise.
The research question of how some firms succeed over time while others fail to do so has long captured the interest of scholars. This dissertation aims to address this question by proposing that a firm can remain successful as long as it correctly understands and capitalizes on the implications of a changing world. The existing literature associates variation in organizational success across firms with heterogeneity of their internal resources. In turn, sustainability of a firm’s competitive advantage is explained as a function of the ongoing evolution of a firm’s heterogeneous capabilities. Building on this theoretical framework, but strongly influenced by the contingency approach, this study aims to expand existing theory by introducing the concept of entrepreneurial capacity. The dissertation proposes that entrepreneurial capacity allows a firm to capitalize on a broad scope of fresh, alternative perspectives that may fundamentally challenge embedded assumptions and path-dependent cognitive schemas that a firm uses. Due to entrepreneurial capacity, a firm becomes exposed to many alternative viewpoints that represent heterogeneity of its external environment. Exposure to a broad array of alternative perspectives prompts a firm to reconsider the effectiveness of its internal operations. As a result, a firm reallocates its internal resources, which leads to improved performance. Given this assumption, the dissertation theorizes and empirically tests the notion that higher heterogeneity among external sources of information coupled with a stronger cognitive ability to comprehend and capitalize on a broader scope of new heterogeneous information will increase the likelihood of successful opportunity exploitation resulting in superior firm performance. Consequently, this dissertation suggests that a firm will be able to succeed over time, as long as it can maintain its strong entrepreneurial capacity.
In addition to the introduction of the concept of entrepreneurial capacity, the second part of this dissertation focuses on the role of contextual factors during the process of opportunity exploitation. The existing literature indicates that sets of collective values and norms accepted and supported by employees can determine how individuals view the world, how they think, and consequently, how they act. Consistent with this tenant, this study aims to explore the impact of the culture of innovation on the relationship between entrepreneurial capacity and firm performance. The dissertation proposes that when a firm establishes shared cultural norms supporting the process of opportunity exploitation, a firm culture should increase employee motivation to become engaged in behaviors positively reinforcing the effect of entrepreneurial capacity on firm performance.
Empirical tests of the proposed model are based on data collected in the healthcare industry. Research on health care strongly suggests that this very dynamic and complex setting, characterized by a high degree of external volatility provides a valid empirical setting to test the associations between a firm’s entrepreneurial capacity, culture of innovation and firm performance. Results of empirical analyses confirm a positive relationship between entrepreneurial capacity and firm performance. Furthermore, results of the study confirm a significant role played by a culture of innovation. Findings and the study’s implications for research and practitioners are discussed
