INTERACTION OF INNOVATION STRATEGY AND DYNAMIC CAPABILITIES IN ACHIEVING COMPETITIVE ADVANTAGE: THE MODERATING ROLE OF ENVIRONMENTAL DYNAMICS
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Keywords:
Innovation Strategy, Capabilities Dynamic, Excellence Competitive, Dynamism Environment, Corporate Adaptation, Management Strategic
Abstract
In a dynamic and competitive business environment, innovation strategy and dynamic capabilities are key to achieving competitive advantage. This study proposes a conceptual framework to explore the interaction between innovation strategy and dynamic capabilities, with environmental dynamism as a moderating variable. Innovation strategy enables firms to introduce new products and services that meet evolving market demands, while dynamic capabilities enable firms to adapt to environmental changes. Although the relationship between innovation strategy and competitive advantage has been recognized, there is still a gap in understanding how environmental dynamism moderates this relationship. This study aims to answer the research questions on the effect of innovation strategy on competitive advantage and dynamic capabilities, as well as the mediating role of dynamic capabilities and the moderating role of environmental dynamism. By developing and testing this conceptual framework, this study contributes to the strategic management literature by providing a deeper understanding of the conditions under which innovation strategy effectively achieves competitive advantage. In addition, this study offers practical insights for managers on aligning innovation strategy with dynamic capabilities to navigate complex business environments. The findings are relevant to firms operating in increasingly complex and dynamic business environments and provide directions for future research exploring the interaction between internal and external factors in determining the success of innovation strategies.
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References
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Al-Shami, S. A., Rafeea, S. J., Kamalrudin, M., Widiastuti, T., & Al Mamun, A. (2023). The mediating role of absorptive capacity in the relationship between transformational leadership and corporate entrepreneurship. Cogent Business and Management, 10(2). https://doi.org/10.1080/23311975.2023.2226933
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Bigelow, L. S., & Barney, J. B. (2021). What can Strategy Learn from the Business Model Approach? Journal of Management Studies, 58(2), 528–539. https://doi.org/10.1111/joms.12579
Bruni, E., & Comacchio, A. (2023). Configuring a new business model through conceptual combination: The rise of the Huffington Post. Long Range Planning, 56(1), 102249. https://doi.org/10.1016/j.lrp.2022.102249
Budler, M., Župič, I., & Trkman, P. (2021). The development of business model research: A bibliometric review. Journal of Business Research, 135, 480–495. https://doi.org/10.1016/j.jbusres.2021.06.045
Chang, L.-C., Wang, X., Zhang, S.-Q., Chen, C.-B., Yuan, Z.-H., Zeng, X.-J., Chu, J.-Q., & Tsai, S.-B. (2021). User-driven business model innovation: an ethnographic inquiry into Toutiao in the Chinese context. Asia Pacific Business Review, 27(3), 359–377. https://doi.org/10.1080/13602381.2021.1895492
Clauss, T., Abebe, M., Tangpong, C., & Hock, M. (2021). Strategic Agility, Business Model Innovation, and Firm Performance: An Empirical Investigation. IEEE Transactions on Engineering Management, 68(3), 767–784. https://doi.org/10.1109/TEM.2019.2910381
Desai, K. (2019). Explicating the inter-relationship of Entrepreneurial Orientation, Environmental Dynamism and Dynamic Capabilities on Competitive Advantage of Small- and Medium-sized firms in an emerging market context. Brunel University.
Fatoki, O. (2021). Innovative Behavior and Firm Competitive Advantage: The Moderating Effect of Environmental Dynamism. Foundations of Management, 13(1), 159–170. https://doi.org/10.2478/fman-2021-0012
Filser, M., Kraus, S., Breier, M., Nenova, I., & Puumalainen, K. (2021). Business model innovation: Identifying foundations and trajectories. Business Strategy and the Environment, 30(2), 891–907. https://doi.org/10.1002/bse.2660
Hatani, L. (2023). The role of competitiveness as mediating effect of environmental uncertainty on performance of fisheries companies. Jurnal Ekonomi Dan Bisnis, 26(1), 91–122. https://doi.org/10.24914/jeb.v26i1.3470
Heij, C. V., Volberda, H. W., & Hollen, R. M. A. (2024). To replicate or to renew your business model? The performance effect in dynamic environments. Long Range Planning, 57(3), 102440. https://doi.org/10.1016/j.lrp.2024.102440
Jiao, H., Alon, I., & Cui, Y. (2011). Environmental dynamism, innovation, and dynamic capabilities: the case of China. Journal of Enterprising Communities: People and Places in the Global Economy, 5(2), 131–144. https://doi.org/10.1108/17506201111131550
José Ruiz‐Ortega, M., Parra‐Requena, G., Rodrigo‐Alarcón, J., & García‐Villaverde, P. M. (2013). Environmental dynamism and entrepreneurial orientation. Journal of Organizational Change Management, 26(3), 475–493. https://doi.org/10.1108/09534811311328542
Kamasak, R., Yozgat, U., & Yavuz, M. (2017). Knowledge process capabilities and innovation: testing the moderating effects of environmental dynamism and strategic flexibility. Knowledge Management Research & Practice, 15(3), 356–368. https://doi.org/10.1057/s41275-017-0068-4
Li, D., & Liu, J. (2014). Dynamic capabilities, environmental dynamism, and competitive advantage: Evidence from China. Journal of Business Research, 67(1), 2793–2799. https://doi.org/10.1016/j.jbusres.2012.08.007
Mousavi, S., & Bossink, B. A. G. (2017). Firms’ capabilities for sustainable innovation: The case of biofuel for aviation. Journal of Cleaner Production, 167, 1263–1275. https://doi.org/10.1016/j.jclepro.2017.07.146
Musetti, T. F., Alves Filho, A. G., & Nagano, M. S. (2023). Strategic behavior and dynamic capabilities: studies in micro and small technology-based firms. International Journal of Innovation, 11(2). https://doi.org/10.5585/2023.23754
Naveed, R. T., Alhaidan, H., Halbusi, H. Al, & Al-Swidi, A. K. (2022). Do organizations really evolve? The critical link between organizational culture and organizational innovation toward organizational effectiveness: Pivotal role of organizational resistance. Journal of Innovation & Knowledge, 7(2), 100178. https://doi.org/10.1016/j.jik.2022.100178
Onamusi, A. B. (2020). STRATEGIC RESPONSE CAPABILITY AND FIRM COMPETITIVENESS: HOW OMOLUABI LEADERSHIP MAKES A DIFFERENCE. Business Excellence and Management, 10(4), 23–37. https://doi.org/10.24818/beman/2020.10.4-02
Perez-Luno, A., Gopalakrishnan, S., & Cabrera, R. V. (2014). Innovation and Performance: The Role of Environmental Dynamism on the Success of Innovation Choices. IEEE Transactions on Engineering Management, 61(3), 499–510. https://doi.org/10.1109/TEM.2014.2318085
Posch, A., & Garaus, C. (2020). Boon or curse? A contingent view on the relationship between strategic planning and organizational ambidexterity. Long Range Planning, 53(6), 101878. https://doi.org/10.1016/j.lrp.2019.03.004
Pukas, A. (2023). The Dynamism of the Environment — The Impact on Service Company Competitive Advantage from a CRM Dynamic Capabilities Perspective. Marketing of Scientific and Research Organizations, 49(3), 101–122. https://doi.org/10.2478/minib-2023-0017
Rianawati, A., Kresna Darmasetiawan, N., Susilo Hadi, F., Oktavianus, J., & Avelinda Utama, C. (2024). Enhancement of Indonesia’s blue economy sector through innovation and competitive advantage based on Resource-Based View theory. Problems and Perspectives in Management, 22(2), 165–181. https://doi.org/10.21511/ppm.22(2).2024.14
Rofaida, R., Suryana, Asti Nur Aryanti, & Yoga Perdana. (2020). Strategi Inovasi pada Industri Kreatif Digital: Upaya Memperoleh Keunggulan Bersaing pada Era Revolusi Industri 4.0. Jurnal Manajemen Dan Keuangan, 8(3), 402–414. https://doi.org/10.33059/jmk.v8i3.1909
Sardana, D., Terziovski, M., & Gupta, N. (2016). The impact of strategic alignment and responsiveness to market on manufacturing firm’s performance. International Journal of Production Economics, 177, 131–138. https://doi.org/10.1016/j.ijpe.2016.04.018
Smith, S. D., & Thomas, T. F. (2024). The effects of strategic alignment and strategic clarity on multidimensional task performance. Accounting, Organizations and Society, 112, 101524. https://doi.org/10.1016/j.aos.2023.101524
Teece, D. J. (2018). Business models and dynamic capabilities. Long Range Planning, 51(1), 40–49. https://doi.org/10.1016/j.lrp.2017.06.007
Ting, H.-F. (2012). The Moderating Role of Environmental Dynamism on the Influence of Innovation Strategy and Firm Performance. International Journal of Innovation, Management and Technology. https://doi.org/10.7763/IJIMT.2012.V3.288
Zhang, H., Xiao, H., Wang, Y., Shareef, M. A., Akram, M. S., & Goraya, M. A. S. (2021). An integration of antecedents and outcomes of business model innovation: A meta-analytic review. Journal of Business Research, 131, 803–814. https://doi.org/10.1016/j.jbusres.2020.10.045
Zwicker, A., Fullerton, J. M., Mullins, N., Rice, F., Hafeman, D. M., van Haren, N. E. M., Setiaman, N., Merranko, J. A., Goldstein, B. I., Ferrera, A. G., Stapp, E. K., de la Serna, E., Moreno, D., Sugranyes, G., Herrero, S. M., Roberts, G., Toma, C., Schofield, P. R., Edenberg, H. J., … Uher, R. (2023). Polygenic Scores and Onset of Major Mood or Psychotic Disorders Among Offspring of Affected Parents. American Journal of Psychiatry, 180(4), 285–293. https://doi.org/10.1176/appi.ajp.20220476
Al‐Mamary, Y. H. S., Abdulrab, M., Alwaheeb, M. A., Shamsuddin, A., & Jazim, F. (2022). The impact of technological capability on manufacturing companies: A review. Journal of Public Affairs, 22(1). https://doi.org/10.1002/pa.2310
Alonso-Gonzalez, A., Plata-Rugeles, D., Peris-Ortiz, M., & Rueda-Armengot, C. (2017). Entrepreneurial Initiatives in Colombian Universities: The Innovation, Entrepreneurship and Business Center of Sergio Arboleda University (pp. 151–163). https://doi.org/10.1007/978-3-319-47949-1_10
Al-Shami, S. A., Rafeea, S. J., Kamalrudin, M., Widiastuti, T., & Al Mamun, A. (2023). The mediating role of absorptive capacity in the relationship between transformational leadership and corporate entrepreneurship. Cogent Business and Management, 10(2). https://doi.org/10.1080/23311975.2023.2226933
Baker, J., Jones, D., Cao, Q., & Song, J. (2011). Conceptualizing the Dynamic Strategic Alignment Competency. Journal of the Association for Information Systems, 12(4), 299–322. https://doi.org/10.17705/1jais.00265
Bigelow, L. S., & Barney, J. B. (2021). What can Strategy Learn from the Business Model Approach? Journal of Management Studies, 58(2), 528–539. https://doi.org/10.1111/joms.12579
Bruni, E., & Comacchio, A. (2023). Configuring a new business model through conceptual combination: The rise of the Huffington Post. Long Range Planning, 56(1), 102249. https://doi.org/10.1016/j.lrp.2022.102249
Budler, M., Župič, I., & Trkman, P. (2021). The development of business model research: A bibliometric review. Journal of Business Research, 135, 480–495. https://doi.org/10.1016/j.jbusres.2021.06.045
Chang, L.-C., Wang, X., Zhang, S.-Q., Chen, C.-B., Yuan, Z.-H., Zeng, X.-J., Chu, J.-Q., & Tsai, S.-B. (2021). User-driven business model innovation: an ethnographic inquiry into Toutiao in the Chinese context. Asia Pacific Business Review, 27(3), 359–377. https://doi.org/10.1080/13602381.2021.1895492
Clauss, T., Abebe, M., Tangpong, C., & Hock, M. (2021). Strategic Agility, Business Model Innovation, and Firm Performance: An Empirical Investigation. IEEE Transactions on Engineering Management, 68(3), 767–784. https://doi.org/10.1109/TEM.2019.2910381
Desai, K. (2019). Explicating the inter-relationship of Entrepreneurial Orientation, Environmental Dynamism and Dynamic Capabilities on Competitive Advantage of Small- and Medium-sized firms in an emerging market context. Brunel University.
Fatoki, O. (2021). Innovative Behavior and Firm Competitive Advantage: The Moderating Effect of Environmental Dynamism. Foundations of Management, 13(1), 159–170. https://doi.org/10.2478/fman-2021-0012
Filser, M., Kraus, S., Breier, M., Nenova, I., & Puumalainen, K. (2021). Business model innovation: Identifying foundations and trajectories. Business Strategy and the Environment, 30(2), 891–907. https://doi.org/10.1002/bse.2660
Hatani, L. (2023). The role of competitiveness as mediating effect of environmental uncertainty on performance of fisheries companies. Jurnal Ekonomi Dan Bisnis, 26(1), 91–122. https://doi.org/10.24914/jeb.v26i1.3470
Heij, C. V., Volberda, H. W., & Hollen, R. M. A. (2024). To replicate or to renew your business model? The performance effect in dynamic environments. Long Range Planning, 57(3), 102440. https://doi.org/10.1016/j.lrp.2024.102440
Jiao, H., Alon, I., & Cui, Y. (2011). Environmental dynamism, innovation, and dynamic capabilities: the case of China. Journal of Enterprising Communities: People and Places in the Global Economy, 5(2), 131–144. https://doi.org/10.1108/17506201111131550
José Ruiz‐Ortega, M., Parra‐Requena, G., Rodrigo‐Alarcón, J., & García‐Villaverde, P. M. (2013). Environmental dynamism and entrepreneurial orientation. Journal of Organizational Change Management, 26(3), 475–493. https://doi.org/10.1108/09534811311328542
Kamasak, R., Yozgat, U., & Yavuz, M. (2017). Knowledge process capabilities and innovation: testing the moderating effects of environmental dynamism and strategic flexibility. Knowledge Management Research & Practice, 15(3), 356–368. https://doi.org/10.1057/s41275-017-0068-4
Li, D., & Liu, J. (2014). Dynamic capabilities, environmental dynamism, and competitive advantage: Evidence from China. Journal of Business Research, 67(1), 2793–2799. https://doi.org/10.1016/j.jbusres.2012.08.007
Mousavi, S., & Bossink, B. A. G. (2017). Firms’ capabilities for sustainable innovation: The case of biofuel for aviation. Journal of Cleaner Production, 167, 1263–1275. https://doi.org/10.1016/j.jclepro.2017.07.146
Musetti, T. F., Alves Filho, A. G., & Nagano, M. S. (2023). Strategic behavior and dynamic capabilities: studies in micro and small technology-based firms. International Journal of Innovation, 11(2). https://doi.org/10.5585/2023.23754
Naveed, R. T., Alhaidan, H., Halbusi, H. Al, & Al-Swidi, A. K. (2022). Do organizations really evolve? The critical link between organizational culture and organizational innovation toward organizational effectiveness: Pivotal role of organizational resistance. Journal of Innovation & Knowledge, 7(2), 100178. https://doi.org/10.1016/j.jik.2022.100178
Onamusi, A. B. (2020). STRATEGIC RESPONSE CAPABILITY AND FIRM COMPETITIVENESS: HOW OMOLUABI LEADERSHIP MAKES A DIFFERENCE. Business Excellence and Management, 10(4), 23–37. https://doi.org/10.24818/beman/2020.10.4-02
Perez-Luno, A., Gopalakrishnan, S., & Cabrera, R. V. (2014). Innovation and Performance: The Role of Environmental Dynamism on the Success of Innovation Choices. IEEE Transactions on Engineering Management, 61(3), 499–510. https://doi.org/10.1109/TEM.2014.2318085
Posch, A., & Garaus, C. (2020). Boon or curse? A contingent view on the relationship between strategic planning and organizational ambidexterity. Long Range Planning, 53(6), 101878. https://doi.org/10.1016/j.lrp.2019.03.004
Pukas, A. (2023). The Dynamism of the Environment — The Impact on Service Company Competitive Advantage from a CRM Dynamic Capabilities Perspective. Marketing of Scientific and Research Organizations, 49(3), 101–122. https://doi.org/10.2478/minib-2023-0017
Rianawati, A., Kresna Darmasetiawan, N., Susilo Hadi, F., Oktavianus, J., & Avelinda Utama, C. (2024). Enhancement of Indonesia’s blue economy sector through innovation and competitive advantage based on Resource-Based View theory. Problems and Perspectives in Management, 22(2), 165–181. https://doi.org/10.21511/ppm.22(2).2024.14
Rofaida, R., Suryana, Asti Nur Aryanti, & Yoga Perdana. (2020). Strategi Inovasi pada Industri Kreatif Digital: Upaya Memperoleh Keunggulan Bersaing pada Era Revolusi Industri 4.0. Jurnal Manajemen Dan Keuangan, 8(3), 402–414. https://doi.org/10.33059/jmk.v8i3.1909
Sardana, D., Terziovski, M., & Gupta, N. (2016). The impact of strategic alignment and responsiveness to market on manufacturing firm’s performance. International Journal of Production Economics, 177, 131–138. https://doi.org/10.1016/j.ijpe.2016.04.018
Smith, S. D., & Thomas, T. F. (2024). The effects of strategic alignment and strategic clarity on multidimensional task performance. Accounting, Organizations and Society, 112, 101524. https://doi.org/10.1016/j.aos.2023.101524
Teece, D. J. (2018). Business models and dynamic capabilities. Long Range Planning, 51(1), 40–49. https://doi.org/10.1016/j.lrp.2017.06.007
Ting, H.-F. (2012). The Moderating Role of Environmental Dynamism on the Influence of Innovation Strategy and Firm Performance. International Journal of Innovation, Management and Technology. https://doi.org/10.7763/IJIMT.2012.V3.288
Zhang, H., Xiao, H., Wang, Y., Shareef, M. A., Akram, M. S., & Goraya, M. A. S. (2021). An integration of antecedents and outcomes of business model innovation: A meta-analytic review. Journal of Business Research, 131, 803–814. https://doi.org/10.1016/j.jbusres.2020.10.045
Zwicker, A., Fullerton, J. M., Mullins, N., Rice, F., Hafeman, D. M., van Haren, N. E. M., Setiaman, N., Merranko, J. A., Goldstein, B. I., Ferrera, A. G., Stapp, E. K., de la Serna, E., Moreno, D., Sugranyes, G., Herrero, S. M., Roberts, G., Toma, C., Schofield, P. R., Edenberg, H. J., … Uher, R. (2023). Polygenic Scores and Onset of Major Mood or Psychotic Disorders Among Offspring of Affected Parents. American Journal of Psychiatry, 180(4), 285–293. https://doi.org/10.1176/appi.ajp.20220476
Published
2025-04-24
How to Cite
Yuwono, M. A., & Ellitan, L. (2025). INTERACTION OF INNOVATION STRATEGY AND DYNAMIC CAPABILITIES IN ACHIEVING COMPETITIVE ADVANTAGE: THE MODERATING ROLE OF ENVIRONMENTAL DYNAMICS. Eksis: Jurnal Riset Ekonomi Dan Bisnis, 19(2), 59-72. https://doi.org/10.26533/eksis.v19i2.1326
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