Surviving Radical Technological Change through Dynamic Capability: Evidence from the Typesetter Industry

Abstract

Recent work in the field of management has focused on ‘dynamic capability’, the ability of a firm to develop new capabilities in response to shifts in its external environment, as a significant source of competitive advantage. This paper enhances our understanding of dynamic technical capability. While most established firms have difficulty adapting when confronted with radical, competence-destroying technological change, Mergentbaler Linotype, a firm founded in 1886, has survived three such revolutions and led the market in 1990. An examination of the history of this firm in contrast to other incumbents from the same era highlights two key contributors to dynamic technical capability: external integrative capability and geographically distributed research sites. External integrative capability comprises two elements: internal investments that develop absorptive capacity and an external communication infrastructure to facilitate the transmission of external knowledge. In combination, these elements enable the firm successfully to identify and integrate knowledge outside its boundaries. Geographically distributed research sites facilitate the development of new technical capability in three ways. First, competition among research sites spurs innovation. Second, multiple locations help to overcome organizational inertia by allowing for the development of different generations of technology in different locations. Finally, multiple locations provide a source of variation, enabling the firm to leverage differences in local environments.