Incumbents’ Capability Acquisition Strategies in Sustainability Transitions: An Analysis of the Battery Electric Vehicle Industry

Abstract

The purpose of this paper is to investigate how internal capabilities and external market conditions influence an incumbent’s choice to employ internal development or external sourcing as its preferred strategy to acquire new capabilities in a sustainability transition. Using a data sample of 8 incumbent automotive firms playing in the battery electric vehicle (BEV) market, this paper uses an in-depth, longitudinal, multiple case study research design to explore the conditions that influence incumbents’ strategic behavior in response to BEVs as a radical sustainable innovation in a sustainability transition. The findings demonstrate that incumbents try to bridge the capability gap that emerges as a result of the radical sustainable innovation by externally sourcing the newly required core and complementary capabilities when their current portfolio is still underdeveloped. However, as an incumbent’s capability gap diminishes and its portfolio becomes more developed, the capability acquisition strategy will shift from external sourcing to internal development. This study theoretically and empirically contributes to the literature by advancing understanding of how firm-level differences may influence an incumbent’s propensity to engage in a particular capability acquisition strategy and by providing evidence that it is important to examine the role of micro-level actors in the context of sustainability transitions to prevent overgeneralization.