Technological capability, strategic flexibility, and product innovation

Abstract This paper examines the role of technological capability in product innovation. Building on the absorptive capacity perspective and organizational inertia theory, the authors propose that technological capability has curvilinear and differential effects on exploitative and explorative innovations. The findings support the proposition that though technological capability fosters exploitation at an accelerating rate, it has an inverted U‐shaped relationship with exploration. That is, a high level of technological capability impedes explorative innovation. Strategic flexibility strengthens the positive effects of technological capability on exploration, such that when strategic flexibility is high, greater technological capability is associated with more explorative innovation. Copyright © 2009 John Wiley & Sons, Ltd.