Purpose – It has been argued that firms may utilize their resources and capabilities through the development of innovations in the form of new products, services or processes, and empirical research has confirmed that there is a positive relationship between the implementation of innovation activities and future performance of firms. Some firms prove to be better at reproducing innovation success than other firms, and the capacity to do so can be framed as an innovation capability. However, the term innovation capability is ambiguously treated in extant literature. There exist several different definitions of the concept and the distinction between innovation capabilities and other types of capabilities, such as dynamic capabilities, is neither explicitly explained, nor is the relationship between the concept and other resource- and capability-based concepts within strategy theory established. Even though innovation increasingly is being pointed to as crucial for firms sustainable competitiveness in contemporary volatile and complex markets, the strategy-innovation link is underdeveloped in extant research. To overcome this divide this paper contributes with a conceptual framework to discuss innovation capability. Design/methodology/approach – Due to the status of the extant research, we chose a conceptual research design to answer our research question. Based on careful examination of current literature on innovation capability specifically and the strategy-innovation link in general, we suggest to analyse innovation capability along two dimensions - innovation novelty and market characteristics. This enable us to identify four different contexts for innovation capabilities in a two-by-two matrix. Subsequently, we discuss what types of innovation capabilities that are expected to be required in the four different contexts. Originality/value – We report on, and synthesize, current understanding of innovation capability and provide a framework to discuss different contexts for innovation capability. The provision of this framework contributes with new knowledge on the strategy-innovation link as well as clarifying the conceptual understanding of capabilities within the strategy literature and establishing the relationship between these underpinnings and innovation management theory. In particular, we present a contingency perspective on variation in innovation capability related to the four identified contexts. Practical implications – The conclusions reported in the paper provide assistance to managers searching for better ways to manage their innovation capabilities, by providing a framework for discussing how innovation novelty and market characteristics affect the innovation capabilities required in different contexts.
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