How can incumbents innovate?:A Study on the Microfoundations of Absorptive Capacity

Large traditional organizations are often slow to adapt when disruptive innovations reshape their industries. Although they rely on established strengths, they struggle to renew themselves when technological shifts challenge existing organizational forms. This dissertation addresses the fundamental question of how incumbents can innovate by examining the microfoundations of absorptive capacity (AC), the individual and collective behaviors through which firms identify, assimilate, and exploit new knowledge. Drawing on three empirical studies, the dissertation unpacks how employees and leaders interact to shape innovation in established firms. The first study highlights the role of speed in technology adoption, emphasizing constructive tensions, open innovation, and knowledge standardization as key accelerators. The second study investigates how frontline employees navigate goal conflicts, showing that tensions between safety and innovation can stimulate exploratory innovation, whereas conflicts with revenue goals do not. The third study investigates how different forms of power among leaders and employees influence AC, creating either virtuous or vicious cycles of innovation. Together, these studies contribute to a more fine-grained understanding of AC’s microfoundations, demonstrating that innovation in incumbents depends not only on strategy and structure, but also on the daily interactions, goals, and power relations among organizational members. The findings offer both theoretical insights for scholars and practical guidance for managers seeking to strengthen their firms’ AC in the face of disruption.