Adaptive Capacity to Technological Change: A Microfoundational Theory of the Dynamics of Routines

38 Pages Posted: 4 Feb 2015 Last revised: 26 Oct 2015

See all articles by Vikas A. Aggarwal

Vikas A. Aggarwal

INSEAD - Entrepreneurship and Family Enterprise

Hart E. Posen

University of Wisconsin-Madison

Maciej Workiewicz

INSEAD

Date Written: October 15, 2015

Abstract

We develop a microfoundational theory of the dynamics of routines in order to understand heterogeneity in firms’ capacity to adapt to technological change. We show, via a computational model, that a simple process of individual-level learning in the presence of interdependencies can produce organization-level outcomes with the canonical properties of routines: constancy, efficacy, and organizational memory. This process not only produces performance heterogeneity, but also heterogeneity in adaptive capacity to different types of technological change (incremental, discontinuous, disruptive). One implication is that an organization’s exploration policy in the formative periods of routine development influences the adaptive capacity of its routines in maturity. This suggests important strategic trade-offs, not only between performance and adaptive capacity, but also between adaptive capacities to different forms of technological change.

Keywords: routines, technological change, adaptive capacity, inter-firm heterogeneity microfoundations

Suggested Citation

Aggarwal, Vikas A. and Posen, Hart E. and Workiewicz, Maciej, Adaptive Capacity to Technological Change: A Microfoundational Theory of the Dynamics of Routines (October 15, 2015). INSEAD Working Paper No. 2015/09/EFE. Available at SSRN: https://ssrn.com/abstract=2559226 or http://dx.doi.org/10.2139/ssrn.2559226

Vikas A. Aggarwal (Contact Author)

INSEAD - Entrepreneurship and Family Enterprise ( email )

F-77305 Fontainebleau Cedex
France

Hart E. Posen

University of Wisconsin-Madison ( email )

Madison, WI
United States

HOME PAGE: http://bus.wisc.edu/faculty/hart-posen

Maciej Workiewicz

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

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