Exploring the evolution and recombination of firms’ innovation capabilities

Abstract

Objective: The study aims to elucidate whether and how firms evolve and recombine their innovation capabilities over time to adapt to market changes. To do so, Brazilian agricultural machinery manufacturers transitioning to Industry 4.0 were analyzed through the lens of four innovation capabilities (development, operations, transactions, and management). Methods: A longitudinal quantitative study was conducted with 29 companies, considering two periods: 2014 and 2018. The evolution and recombination of firms’ capabilities were explored, respectively, through the Wilcoxon signed-rank test and the fuzzy-set qualitative comparative analysis (fsQCA). Results: The four capabilities evolved and were recombined. The evolution of business-driven capabilities (transactions and management) was more significant than the evolution of technology-driven capabilities (development and operations). In 2014 firms innovated by combining development, operations, and management capabilities (DC*OC*MC), and in 2018 by articulating transactions, operations, and management capabilities (TC*OC*MC). Conclusions: Firms changed their focus from technological innovations to business innovations over time. The study discusses the complementarities between these innovation types in the context of firms converting to Industry 4.0.