When Outsiders Are In and Insiders Are Out: Unveiling the Role of Executant Tacit Knowledge in Fostering Dynamic Capabilities in Germany

Abstract The main objective of this paper is to analyze the impact of inner organizational user innovation on dynamic capabilities and innovative behavior within firms. Previous research has shown that knowledge and information required for innovation are dispersed among the firm and beyond. However, knowledge management does not consider the value of the executant’s (tacit) knowledge as a source of dynamic capabilities and innovation. This is problematic because the introduction of digital technologies in the workplace can lead to significant changes in work and organization, posing a challenge to employees. If technologies are not accompanied by innovative behavior, it can damage a firm’s competitive advantage. To address this issue, it is necessary to recognize the importance of tacit knowledge and inner organizational user innovation to secure a firm’s knowledge capital and enable innovative behavior among employees. This paper utilizes a mixed-methods design that comprises a structural equation model based on a representative study of employees in Germany ( n = 1989) in Study 1 and a qualitative study consisting of 14 expert interviews with managers and consultants in Study 2. This paper contributes to the literature by demonstrating that the theory of dynamic capabilities does not account for the internal friction within the firm between technology and innovative behavior and that knowledge management disregards executant workers in innovation. We show that inner organizational user innovation brings executant’s knowledge back in.