Validating a Design Thinking Strategy: Merging Design Thinking and Absorptive Capacity to Build a Dynamic Capability and Competitive Advantage

Abstract

Design thinking in the management context has suffered from vague definition, gaps in literature, and lack of theoretical foundation. Research streams in absorptive capacity and dynamic capabilities have reached a point of convergence with respect to design thinking and absorption of external knowledge. As such, this study draws on both absorptive capacity and dynamic capability theory to provide theoretical foundation for the strategic consideration of design thinking in strategy, organization design, and organizational learning. In doing so, this study extends seminal absorptive capacity theory providing empirical evidence of design thinking as a dynamic capability to enhance absorptive capacity. Additionally, this study extends dynamic capabilities theory by confirming design thinking as a means of integration, learning, and reconfiguring knowledge to build competitive advantage. Therefore, this study merges existing research streams to empirically validate design thinking as a dynamic capability which must be strategically considered.

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Journal of Innovation Management
JIM 6, 2 (2018) 102-120
Cousins
Validating a Design Thinking Strategy: Merging
Design Thinking and Absorptive Capacity to Build a
Dynamic Capability and Competitive Advantage
Brad Cousins
cousins@ulm.edu | Faculty of University of Louisiana Monroe, Department of Management, 700
University Avenue ,Monroe, Louisiana 71201, USA
Abstract. Design thinking in the management context has suffered from vague definition, gaps in
literature, and lack of theoretical foundation. Research streams in absorptive capacity and dynamic
capabilities have reached a point of convergence with respect to design thinking and absorption of external
knowledge. As such, this study draws on both absorptive capacity and dynamic capability theory to
provide theoretical foundation for the strategic consideration of design thinking in strategy, organization
design, and organizational learning. In doing so, this study extends seminal absorptive capacity theory
providing empirical evidence of design thinking as a dynamic capability to enhance absorptive capacity.
Additionally, this study extends dynamic capabilities theory by confirming design thinking as a means of
integration, learning, and reconfiguring knowledge to build competitive advantage. Therefore, this study
merges existing research streams to empirically validate design thinking as a dynamic capability which
must be strategically considered.
Keywords. Design Thinking; Absorptive Capacity; Dynamic Capability; Competitive Advantage.
Cite paper as: Cousins, B., (2018). Validating a Design Thinking Strategy: Merging Design Thinking and
Absorptive Capacity to Build a Dynamic Capability and Competitive Advantage, Journal of Innovation Manage-
ment, www.open-jim.org, 6(2), 102-120. http://hdl.handle.net/10216/113222
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SM: Jun/2017 AM: Apr/2018

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1 Introduction
Strategic management of dynamic capabilities are required by executives and managers to sense
and seize opportunities in markets, and the knowledge processes of integrating, earning, and
configuring are core elements of dynamic capabilities (Teece & Pisano, 1994; Teece, Pisano,
& Shuen, 1997; Teece D. J., 2007). Based on this view of the importance of knowledge, the
knowledge based view proposes that acquisition and the management of knowledge, is the most
important strategic based resource to gain a sustainable competitive advantage (De Carolis, 2002;
Wiklund & Sheppard, 2003; Curado, 2006). Zahra and George (2002) first identified absorptive
capacity as a dynamic capability by highlighting the need for organizations to continually invest
in sustaining absorptive capacity to exploit new external knowledge. As such, previous research
by Acklin (2013) and Llamas (2015) offered absorptive capacity as the theoretical foundation
for design thinking as a means to acquire external knowledge, but cited the need for further
research on how design management could be used as a dynamic capability for competitive
advantage.
Design thinking has recently been proposed as a dynamic capability but scholars have identified
that more studies are needed related to its impact in organizations due to vague definition, gaps
in literature, and lack of theoretical foundation within the management research (Johansson-
Skoldberg et al., 2013). Recent theoretical advances have linked design thinking as a dynamic
capability to facilitate absorptive capacity of external knowledge which has led scholars to call
for additional empirical research to understand how design thinking is a management process for
absorptive capacity (Acklin, 2013; Llamas, 2015). The application of the two research streams of
dynamic capabilities and absorptive capacity are substantially similar in their recognition that
organizations must be customer focused and have the capability to acquire and commercialize
knowledge external to the organization.
This qualitative multiple-case study describes and documents the perspectives of subject matter
experts (SMEs) on how design thinking can support an organization’s absorptive capacity and
thus provides a dynamic capability and competitive advantage to acquire, assimilate, and apply
external knowledge for value creation. This study advances the theoretical framework postulated
by Llamas (2015) and Acklin (2015) that design thinking is a management process for absorp-
tive capacity by acquiring, assimilating, and applying external knowledge (Llamas, 2015; Acklin,
2013). This theoretical framework supports the purpose of this study by providing a foundation
on which to apply design thinking as a dynamic capability and competitive advantage by en-
hancing absorptive capacity of an organization (Llamas, 2015). The scholarly foundation for this
framework is both the seminal work on absorptive capacity by Please confirm the year Cohen and
Levinthal (1989) as well as the dynamic capabilities framework provided by Teece and Pisano
(1994).
2 Previous Research
The concept of design thinking, from a scholarly point of view, has been developed in two
different discourses of the design and managerial discourse (Johansson-Skolberg et al., 2013;
Gasparini, 2015). Theoretical development of design thinking has primarily been accomplished
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through the more scholarly design discourse, which, despite significant attention in academic and
practitioner based literature, lacks theoretical foundation and is anecdotal (Johansson-Skolberg
et al. 2013; Llamas, 2015). Within the design discourse, there are five clear sub-discourses that
have theoretical foundation as well as an academic following (Johansson-Skoldberg et., 2013).
The younger management discourse of design thinking, which has gained significant popularity
since approximately 2003 with management practitioners (Johansson-Skoldberg et al., 2013), was
developed primarily in the business media and practitioner testimonial .
2.1 Designer Thinking in the Design Discourse
Schon pragmatic-based philosopher and educator concerned with the study of organizational
knowledge acquisition (Visser, 2010; Johansson-Skolberg et al., 2013). Schon (1983) seminal
work on reflection in action described the practice, or methods, in which designers deal with
ambiguity in problem solving (Kimbell, 2009; Kimbell, 2011) depending on the situation. Schon’s
hermeneutics view of design problem solving relied on the designers ability to create a solution
and reflect upon that creation for continual improvement and re-creation (Johansson-Skoldberg
et al., 2013) to revise understanding . Artistry and intuition are inherent in the ability of
the designer to frame and reframe the problem space to offer possible solutions based on the
individual solving the problem and context of the problem . This is relevant, as it inspired the
post-rationalist, design methods movement , moving design-management theory from a problem
solving cognitive concept toward a situational concept.
The design-methods movement (Buchanan, 1992; Buchanan & Margolin, 1995; Jones, 1992)
highlighted situational aspects of design as designers reflect on the problem, solution and context
which frames the problem space . Buchanan (1992) moved design from its cognitive roots to
focus on patterns of reasoning employed by designers to approach ill defined, or wicked, problems
noting innerrelationship of the analytic and synthetic phase where designers combine and balance
requirements to produce a solution (Buchanan, 1992; Johansson-Skolberg et al., 2013). Cycling
through contextual exercises to make sense of things (Wylant, 2010; Johansson-Skolberg et al.,
2013) facillitates communication and interaction among participants identifying participant views
and concerns. In Buchanan’s view, integrative nature of design is relevant to developing the
hypothesis and a set of acceptable solutions (Buchanan, 1992). Wylant (2010) noted this ability
of designers to select the context, and recursively cycle through solutions, as an integral part of the
designer’s choice of a dominant context on which sense can be made of things (Johansson-Skolberg
et al., 2013; Wylant, 2010). The highly dynamic, recursive and heuristic nature of problem solving
which the designer continually reflects on a problem situation, interprets feedback, and reframes
the problem relies on the context which the problem is approached .
Krippendorff (2006) identified stakeholders, and ultimately the user, as the focus of design thus
moving away from technology centered design toward human-centered design . Krippendorff
(2006) further proposed a new science of design whereby designers, due their unique capabili-
ties and competencies, claim expertise in a second order understanding of how others use and
understand artefacts. Second order understanding is dialogic and interactive by creating a new,
more dynamic, form of knowledge which uncovers dynamic ways in which artifacts change user
interpretation, functional parameters required, and influece selection of the appropriate design
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.
2.2 Design Thinking in the Managerial Discourse
Development of design thinking in the managerial discourse has taken a bottom-up approach
highlighting design contributions to innovation prior to integrating management . Since the
majority of content is practitioner based, to facilitate understanding, literature is dominated as
a case-based approach referencing successes of design as a metaphorical and a managerial way
to approach design. This bottom-up approach contributes to curiosity surrounding the concept
and its contibutions to innovation (Johansson-Skoldberg et al.,2013). Consequently, popularity
of design thinking as applied to innovation has been engineering-realated, based on statistical
relationships and rational models of innovation. As such, development of design thinking in the
management context was initially based on overly positive descriptions without contextualized
meaning (Johansson-Skoldberg et al., 2013) and rich theory building indicative of scholarly work.
Focus on the successes of design thinking related to practitioner accounts and innnovation has
neglected theory from design research areas related to professional designers and how they think
and work .
Hassi and Laakso (2011) identified the concepts of human-centered approach, visualizing, col-
laboration, thinking by doing, and divergent and convergent work styles. Of these concepts,
the human-centered approach is highlighted in much of the literature on design thinking and
usually involves empathy for the subjects (Brown T. , 2008; Clark & Smith, 2008; Dunne &
Martin, 2006; Holloway, 2009; Junginger, 2007) through a putting people first approach (Brown
T. , 2008; Porcini, 2009; Ward, Runcie, & Morris , 2009; Porcini, 2009) which uses integrative
thinking to identify the most important aspects of problems and creating a compromised solution
from competing possible solutions (Brown T. , 2008; Fraser, 2009). Divergent and convergent
approaches as well as combinations of the two, is a practice of creating, or visualizing, multiple
possibilities without assuming that these possibilities are the best (Boland & Collopy, 2004) but
are instead paths toward a solution . Visualizing is a way to make sense of things in an intangi-
ble manner other than words or symbols in order to communicate ideas to be discussed as the
process moves toward convergence and mutual understanding. Thinking by doing is an iterative
practice which uses prototypes and reflection in action to stimulate thinking and explore multiple
ideas (Boland & Collopy, 2004; Lockwood, 2009) by turning the visualized concepts into tangible
representations to stimulate further reflection and exploring (Boland & Collopy, 2004).
Boland and Collopy (2004) expanded on Simon (1969) theory of design as a method of changing
existing states into more preferred states. Simon (1977) proposed a new science of management
decision making which, due to management’s responsibility to change existing situations into
preferred situations, should be treated similar to applied sciences of engineers and architects.
Previously, design was viewed as a noun describing a completed process rather than as a verb
indicative of an ongoing process or management action (Boland & Collopy, 2004; Boland &
Collopy, 2007). This distinction in the action, as a verb, of changing an existing situation into
a preferred, is a key aspect of design making which makes organizational leaders an active part
of the process rather than passive responders to presentations. Boland & Collopy (2007) state
that this verbal form of design, where the management are active participants, is a critical skill
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for successful organizational leaders and the design attitude is an important cognitive mode for
practising managers which should be addressed by management education and practice.
From an organizational perspective, design thinking used as a method to approach organizational
problem solving as well as a skill for managers, developed by Dunne and Martin (2006) noted cog-
nitive, affective, and interpersonal skills designers have developed. Hassi and Laakso (2011) note
methods designers have developed as practices, thinking styles, and mentalities which underscore
the close relationship of the organisational practices sub-discourse with the practitioner-focused
sub discourse of design as a way of working with innovation and design. As such, Dunne & Mar-
tin (2006) notes the need for management education to build the skills necessary for a deeper
understanding of the end user and end user experience using observational research techniques
to uncover needs that are not easily articulated (Leonard & Rayport, 1997). Building on Argyris
and Schon (1978), Martin references the need for management education to develop skills of
inquiry within MBA students which note the importance and usefulness of others to understand
the value of curiosity and inquiry in problem solving . By developing design thinking separately
from the practioner-based discourse, which focuses on design and innovation, Martin removes
the concept of designerly ways of working and focuses on the mental processes used by designers
which can be adopted by everyone who follows the process . By decoupling design thinking from
design, innovation, and new product development, Martin opened up the design-thinking concept
as a process to use in a variety of disciplines and industries which in turn validates the concept
as a skill needed by practising managers. As a result, design thinking has grown within the
management community, due to Martin’s wide reach as a speaker and author, to influence work
in a wide range of disciplines, including strategy and organizational change and development
(Johansson-Skolberg et al., 2013; Sato, Lucente, & Meyer, 2010).
Despite the lack of empirical evidence and firm theoretical base within the management con-
text, design thinking has increasingly been applied by organizations (Liedtka, King, & Bennett,
2013; McCreary, 2003) in a variety of industrial contexts . The relatively small amount of em-
pirical research that exists on design thinking in organizations has evolved from a performative
perspective focused on the performance of the design-thinking methodology and accompanying
tools (Seidel & Fixson, 2013; Carlgren, 2013). Additionally, empirical research has been con-
ducted in experimental settings involving students however the results have been mixed . The
lack of substantive empirical research has led to reliance on practitioner based accounts of de-
sign thinking resulting in overly positive views of the value of design thinking. As a result of
overly positive practitioner accounts, academic researchers have been apprehensive to approach
the concept . Accordingly, prior scholarly research had called for additional studies to determine
the success of design management absorption as a dynamic capability to build a competitive
advantage and unless research builds on the scholarly aspects of the design discourse the con-
cept of design thinking in the management discourse will likely die (Johansson-Skoldberg, et al.,
2013).
3 Absorptive Capacity
Organizational level absorptive capacity was introduced by economists Cohen and Levinthal
(1989) seminal work explaining why organizations invest in research and development. Absorp-
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tive capacity conceptualized an organization’s ability to exploit external knowledge through a
sequential process to recognize the value of external knowledge, assimilate this new knowledge
through exploratory learning, and apply assimilated knowledge to create new knowledge and
value . Early research into absorptive capacity focused on learning and innovation with respect
to the performance of the firm (Volberda et al., 2010) and the firm’s ability to acquire, assimilate,
and apply external knowledge . Much early empirical research focused on an innovation based
learning process evident in research and development projects and firms.
Todorova and Durisin (2007) extended seminal work of Cohen & Levinthal (1989), subsequent
research by Zahra and George (2002) and Lane (2006) as well as drawing on learning theory, to
propose the acquisition of knowledge by an organization utilizes internally existing organizational
knowledge to recognize the potential value of external knowledge. With resepect to assimilation
of knowledge, Todorova and Durisin (2007) note that organizational assimilation is contingent
on the social integration process of transformation as proposed by Zahra and George (2002), and
Todorova and Durisin, 2007. Likewise, the application phase of the model highlights the dynamic
capability perspective of absorptive capacity previously overlooked by Zahra and George (2002)
as well as this dynamic nature of feedback loops use during application.
The knowledge based view of absorptive capacity is an outgrowth of the resource-based view
of the firm proposed by Barney (1986) which highlights the impact of partner contributions
and outward knowledge transfer to absorptive capacity .The knowledge-based view of absorptive
capacity stresses the importance of developing knowledge, promoting organizational learning,
enhancing open innovation, managing alliances, creating strategic variety, and impacting financial
performance . Research by Lichtenthaler (2016) noted both benefits and drawbacks of absorptive
capacity along with tendency of prior research to only focus on benefits. Volberda et al. (2010)
highlights the impact other factors such as a dynamic environment have on the level of absorptive
capacity.
According to Barney (1991), firm resources are all capabilities, processes, attributes, assets,
information, and knowledge controlled by a firm, which can be strategically manipulated to gain
competitive advantage.
Grant (1996) confirms the importance of knowledge as the most strategically important resources
of the firm and Kogut and Zander (1992) maintain knowledge is the main determinant of com-
petitive advantage. Accordingly, the strategic importance of knowledge strongly reinforces the
relevance of absorptive capacity as a key resource in developing and increasing a firm’s knowl-
edge (Volberda et al., 2010). Building on the concept of dynamic capability proposed by Barney
(1991), Zahra and George (2002) furthered the theoretical base of absorptive capacity as a dy-
namic capability related to the management and successful exploitation of knowledge. Zahra and
George (2002) recognized the need for organizations to continually invest in sustaining absorptive
capacity to exploit new information which Todorova and Durisin (2007) built on this point stress-
ing additional dynamic factors of social and organizational factors. Zahra and George (2002) was
important from the organizational standpoint as it recognized organizational absorptive capacity
does not reside in any one individual but resides in the accumulation of all individual capabilities
(Cohen & Levinthal, 1990; Volberda et al., 2010).
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4 Dynamic Capabilities, Competitive Advantage, and the Business
Model
Chandler’s (1962) seminal work on strategy and structure is credited with first identifying a
firm’s strategy for growth as determining the strategic management of an organizations valuable
resource . Penrose (1959) in her theory of the growth of the firm first viewed the firm as a com-
petitive bundle of resources (Hoskisson et al., 1999). Building on Penrose (1959), the resource
based view gained widespread attention in a variety of theoretical streams in the 1980’s result-
ing in Barney (1991), which identified the resource traits necessary for sustainable competitive
advantage as value, rareness, inimitability, and substitutability.
The resource-based view postulated by Barney (1991), created a concrete base on which to build
a variety of research streams related to the resource-based view of the firm (Hoskisson, et al.,
1999). Porter (1991) proposed the dynamic theory of strategy noting the most important of
all resources is the ability to learn and adapt to the changing environment. Subsequently, to
overcome the limitations of the resource-based view and building on Porter (1991), Teece and
Pisano (1994) proposed the dynamic capability framework to address the changing global busi-
ness environment which requires organizations to respond quickly to the market, engage in rapid
innovation, and adapt to future competition and markets. To compete in this changing environ-
ment, organizations must develop capabilities to adapt, integrate and reconfigure both internal
and external competencies (Ambrosini & Bowman, 2009; Teece & Pisano, 1994). Accordingly,
the dynamic capability framework proposes that competitive advantage is achieved in the global,
fast moving, markets by an organization’s ability to sense, seize, and transform opportunities by
creating, renewing, or altering the resource mixes (Teece, Pisano, & Shuen, 1997; Teece D. J.,
2007).
The dynamic capabilities framework is a strategic view descending from Schumpteter (1934)
theory of economic development. Teece and Pisano (1994) propose managerial and organization
competencies of integrating, learning, and reconfiguring are three key components to dynamic
capability and competitive advantage. Similarly, Ambrosini (2003) identified four organizational
and managerial dynamic capability processes; learning, creative integration, reconfiguration, and
leveraging. The dynamic capability of knowledge exploitation can be leveraged into a competitive
advantage when customer-centric, value creating, business models are developed which focus on
user needs and delivery (Chesbrough & Rosenbloom, 2002; Mansfield & Fourie, 2004). Of the
resources and assets of the firm, knowledge related assets are most valuable due to their ability to
be coordinated and integrated in a manner, which creates value but cannot be replicated in the
market . Therefore, strategic management of dynamic capabilities is required by executives and
managers to sense and seize opportunities by allocating, reallocating, combining, or recombining
the resources and assets of the organization to provide customer solutions . Accordingly, De
Carolis (2002) offers knowledge-based view of the firm as an extension of the resource based view
which considers knowledge as the most important strategic based resource of the firm . Wiklund
and Sheppard (2003) notes if a resource is difficult to formalize, articulate, and transfer to other
organizations, and the resource is also organized and valuable, then it meets the threshold of
rare and inimitateable, thus providing a sustainable competitive advantage.
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5 Research Method
The problem this study addresses are gaps in literature on how design thinking can support an
organization’s absorptive capacity and competitive advantage to acquire, assimilate, and apply
external knowledge for value creation (Llamas, 2015). Empirical studies have been conducted
and point to absorptive capacity as a key factor for multiple outcomes (Jansen, Van Den Bosch,
& Volberda, 2005; Schildt, Keil, & Maula, 2012), however, results are inconsistent and ques-
tion the assumptions that firms perform better because of absorptive capacity. While results
are inconclusive as to the extent absorptive capacity contributes to firm performance, research
has shown that as firms perform higher, they invest more in absorptive capacity . The incon-
sistencies in empirical results, along with base assumptions on which prior research was based,
has caused the need for further research to understand the trade-offs and conflicting contingen-
cies that impact the functioning of absorptive capacity at the firm level .The purpose of this
qualitative multiple-case study is to describe and document the perspectives of SMEs on how
design thinking can support an organization’s absorptive capacity and competitive advantage to
acquire, assimilate, and apply external knowledge for an organizations value creation.
This research study utilized a qualitative, multiple-case study to describe key insights of six SMEs
in the field of design thinking to study the application of design thinking in various settings to
determine how design thinking is used to facilitate absorptive capacity. According to Yin (2014),
a unit of analysis is the phenomenon or population that must be defined, therefore, within the
context of this research, the term case means a single person, a SME, and how SMEs describe the
application of design thinking to acquire, assimilate, and apply external knowledge. Therefore,
for the purpose of this study the unit of analysis is the case and how SMEs view design thinking
promotes absorptive capacity to acquire, assimilate, and apply external knowledge (Acklin, 2013;
Llamas, 2015) to build a dynamic capability and competitive advantage.
The resulting six-design thinking SMEs are all recognized design-thinking practitioners within
the design-thinking community and skilled in the application of design thinking in various orga-
nizational contexts. A wide range of organizational contexts was selected for this research study
in order to provide a wide range of perspectives in order to view the application of design think-
ing in multiple contexts. Participants who were deemed to have little experience, knowledge,
or lacked breadth of application of the concept were disqualified from the research study. Six
participants was determined to be an appropriate amount for this exploratory research where
an in depth, open ended, interview process was used to engage a small number of samples and
determine replication logic across the multiple case research study design .
5.1 Data Collection, Processing, and Analysis
To facilitate rich exploration, and description, of the perspectives of SMEs this research study
chose semi-structured interviews to increase understanding the phenomenon or phenomena from
the participant’s point of view . The six participants in this research study were taken through a
semi-structured interview process, which consisted of a series of open ended questions to describe
how SMEs view the ability of design thinking to facilitate absorptive capacity and competitive
advantage to acquire, assimilate, and apply external information for organizational value creation
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(Acklin, 2013; Llamas, 2015). Replication of results by conducted cross-case synthesis was used
to indicate the extent to which the replication logic was either a literal replication whereby the
outcome was predicted or a theoretical replication based on a prediction of contrasting data . The
research data collected was triangulated to provide cross-data validity checks of the data collected
from the multiple cases to achieve more accurate and valid estimates of results (Merriam, 2009;
Stake, 1995).
To gain better understanding of the research outcome as well as improve the quality of the
investigation and study, triangulation was accomplished by both theory and investigator trian-
gulation. Investigator triangulation involves using multiple investigators to analyze the same
set of data which, in the case of this research, also supports theoretical triangulation by using
multiple perspectives to interpret a single set of data. In this research study, investigators in-
cluded the researcher, and two independent evaluators outside of the field of design thinking and
management in the fields of Organizational Behavior and Finance and Statistics. Each evalua-
tor read the entire transcript, reviewed the data analysis process and results, and validated the
researchers’ interpretations of transcript data. Therefore, investigator triangulation was accom-
plished via two independent investigators who also provided theoretical triangulation by offering
multiple perspectives outside of the field of study .
6 Empirical Results
This study confirms the ability of design thinking to support an organizations absorptive ca-
pacity to provide both a dynamic capability and competitive advantage relevant to absorption
capacity of external knowledge. The study viewed the flow of external information through the
lens of absorptive capacity as a means to explore the potential dynamic and competitive nature
of design thinking. As such, this study’s central research questions were concerned with acqui-
sition, assimilation, and application of knowledge outlined in the economic model of absorptive
capacity. The study’s findings confirm design thinking is a dynamic capability, which provides a
competitive advantage to facilitate absorptive capacity of external knowledge and as such, three
significant themes emerged throughout this multiple-case study of SMEs.
The first theme evidenced in this study is the ability of design thinking to dynamically integrate
the external into an internal process for the purpose of learning as highly dynamic requiring
management interaction. The design-thinking process builds deep understanding of end user
and end user experiences through observational research techniques uncovering needs not easily
articulated (Leonard & Rayport, 1997). Llamas (2015) referred to design thinking as a project
based method to facillitate collaboration between new product design, engineering, and end
users to create effective solutions to meet social needs. In Buchanan’s view, the very act of
assessing and formulating the problem is part of the problem and allows simultaneious devel-
opment of analytic and synthetic phases in which designers combine and balance requirements
to produce a solution (Buchanan, 1992; Johansson-Skoldberg et al., 2013) According to Teece
et al. (1997), dynamic capabilities are defined as the three processes of integrating, learning,
and configuring. Ambrosini (2003) added to this dynamic view stating, the four organizational
and managerial processes of learning, creative integration, reconfiguration, and leveraging are a
dynamic capability. Executives and managers are required to sense and seize opportunities by
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allocating, reallocating, combining, or recombining the resources and assets of the organization
to provide customer solutions and if a resource is difficult to formalize, articulate, and transfer
to other organizations then it meets the threshold of rare and inimitateable, thus providing a
sustainable competitive advantage. As such, design thinking spans several of these capabilities
as it integrates customers or users into the learning and configuring process for the purpose of
leveraging insights to create value and therefore must be considered a dynamic capability.
The second theme identified participant views of the contingent nature of competitive advantage
in acquiring knowledge and difficulty in maintaining sustainability. Participant seemed to focus
on the tendency of design thinking overly focus on tools to engage and acquire knowledge,
which most participants viewed as imitable. SME’s indicated contingency exists in the degree of
competitive advantage and sustainability relative to a host of organizational factors. Additionally,
participants noted the contingent nature of speed and efficiency in application of knowledge
as a factors impacting competitive advantage. The immediacy assumption of prior absorptive
capacity research, assumes that knowledge acquired must financially materialize immediately and
does not allow for time lags. Furthermore, Leonard and Barton (1995) noted that effective use of
knowledge is an important factor in value creation, which is impacted by a lack of understanding
of the sciences involved in the newly acquired knowledge as well as the misunderstanding by
management of the capabilities of the firm to apply external knowledge . Teece (2007) described
the business model as a reflection of management perspective about what customers want, and
recognizes the acquisition and the management of knowledge as dynamic capabilities that provide
sustainable competitive advantage (Wiklund & Sheppard, 2003; Curado, 2006). Furthermore,
Teece (2007), also highlights the ability to take advantage of opportunity and remain competitive
through management of the resources of a business enterprise’s tangible and intangible assets
as dynamic capabilities. Teece (2007) goes on to indicate the business model as a reflection
of management perspective about what customers want and how the organization can meet
those needs and get compensated. Therefore, design thinking is a dynamic capability to build
competitive advantage, however, contingency is related to organizational factors which promote
aborptive capacity, speed and efficient application of knowledge.
The third theme identified competitive advantage of design thinking is derived from a highly
dynamic interrelationship between assimilation and application of knowledge in design-thinking.
This dynamic interrelationship is based on integration of the customer or user into the proto-
typing and iteration process. Integration of the external source of knowledge into prototyping is
boundary spanning as assimilation and application of knowledge happens simultaneously. The
process gets more dynamic as prototypes go through the iterative process whereby prototype
improvements are made until an acceptable solution is achieved. Hassi and Laakso (2011) re-
ferred to this as an iterative practice which uses prototypes and reflection in action to stimulate
thinking and explore multiple ideas (Boland & Collopy, 2004; Lockwood, 2009) by turning vi-
sualized concepts into tangible representations to stimulate reflection and exploring (Boland &
Collopy, 2004). Design thinking is explorative and experimental, tolerant of ambiguity, oriented
toward the future, and optimistic involving a wide range of stakeholders as an integral part
of design thinking (Brown T. , 2008; Brown T. , 2009; Clark & Smith, 2008; Dunne & Mar-
tin, 2006;Holloway, 2009; Lockwood, 2010). Boundary spanning activity in absorptive capacity
research outlined by Todorova and Durisin (2007) draws on learning theory to propose the ac-
quisition of knowledge by an organization utilizes internally existing organizational knowledge
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to recognize the potential value of external knowledge and subsequently, the assimilation phase
is contingent on a social integration process of transformation as proposed by Zahra and George
(2002). This is also supported from the dynamic capability perspective, which highlights the dy-
namic nature through the contribution and value of feedback loops . Considering this dynamic
nature, Llamas (2015) referred to design thinking as collaboration between new product design,
engineering, and end users to create effective solutions.
7 Theoretical Contributions
This study contributes to previous research by Acklin (2013) and Llamas (2015) that design
thinking is a management process for absorptive capacity by acquiring, assimilating, and ap-
plying external knowledge. The scholarly foundation is seminal work on absorptive capacity by
Cohen and Levinthal (1989) that proposes firms benefit from investing in absorptive capacity
to preempt environmental changes by taking a knowledge based view of absorptive capacity to
promote organizational learning, enhance open innovation, manage alliances, create strategic va-
riety, and impact financial performance . This was later extended by Lane and Lubatkin (1998)
noting organizations must focus on understanding their internal knowledge and the process which
it acquires new knowledge, converts that knowledge to capabilities, and the ability of those ca-
pabilities to meet demands of the environment. Barney (1991), and Zahra and George (2002)
extended the theoretical base of absorptive capacity as a dynamic capability related to the man-
agement and successful exploitation of knowledge. As such, this study is a further extension of
the seminal work of Cohen and Levinthal (1989) absorptive capacity theory by providing empir-
ical evidence in supporting design thinking as a dynamic capability and competitive advantage
to enhance absorptive capacity of organizations (Llamas, 2015).
This study also extends dynamic capabilities theory as an extension of Schumpteter (1934)
theory of economic development. The dynamic capabilities framework proposes managerial and
organization competencies of integrating, learning, and reconfiguring are key components to
dynamic capability and competitive advantage. Consequently, executives and managers are
required to sense and seize opportunities by allocating, reallocating, combining, or recombining
the resources and assets of the organization to provide customer solutions and if a resource is
difficult to formalize, articulate, and transfer to other organizations then it meets the threshold of
rare and inimitateable, thus providing a sustainable competitive advantage. As an extension to
this theory, Teece (2007) extended the dynamic capabilities theoretical framework to include the
business model which must have capabilities to analyze multiple alternatives, understand user
needs and deliver what users want . As such, this study provides empirical support for design
thinking as a dynamic capability to provide a competitive advantage due to its understanding of
the customer which facilitates learning and customer solutions; however, this research recognizes
the need for further empirical investigation relative to managerial interaction in a variety of
contexts.
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8 Conclusion and Recommendations for Future Research
Organizational learning literature highlights the needs for organizations to take a system think-
ing approach to building a framework to promote absorptive capacity to adapt to the dynamic
and increasingly complex nature of external knowledge, this is particularly relevant in the new
digital economy. This study has provided empirical evidence of design thinking as a dynamic
capability to enhance absorptive capacity to acquire, assimilate, and apply external knowledge
(Acklin, 2013; Llamas, 2015) and provides a foundation on which to strategically consider de-
sign thinking (Llamas, 2015). The knowledge uncovered in study empirically extends previous
research by Acklin (2013) and Llamas (2015) by further validating design thinking as a strategy
and organizational design consideration thus bridging theoretical gaps and providing a basis for
further study of the effects of design thinking in a variety of managerial contexts. Future empir-
ical research is needed to extend the findings of this study with respect to; dynamic integration
of the external into the internal, dynamic interrelationship between assimilation and application,
and contingent factors impacting competitive advantage and sustainability. Furthermore, future
research should seek to investigate these findings in a variety of strategic, organizational, and
managerial contexts.
According to Teece (2007), a good business model must have capabilities to analyze multiple
alternatives, understand user needs and business models should be based on customer focused
value creation (Chesbrough & Rosenbloom, 2002; Mansfield & Fourie, 2004). While this study
provides validation of design thinking as a strategic in nature, future researchers should explore
the organizational effects of structure, people, and culture on degree of competitive advantage
realized by design thinking in a variety of contexts through empirical based qualitative research.
Similar to Carlgren, Rauth, & Elmquist 2016, this study also confirms the need for further
empirical research to understand how design thinking is used in a variety of organizational
settings and contexts in order to gain a deeper understanding of the impact of these factors on the
absorptive capability, dynamic nature, and related competitive advantage of design thinking to
validate its strategic and competitive importance. In addition to organizational settings, future
research should consider more widespread adoption of design thinking management training
in higher education as well as practical settings. Therefore, future research should focus on
establishing a design thinking management body of knowledge for the purpose of both higher
education development as well as as organizational and practitioner training.
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Biographies
Brad Cousins. Brad Cousins has a Ph.D. in International Business Administration, Masters
in Business Administration, and Bachelors in Design and demonstrates a passion for bring-
ing his courses at the University of Louisiana Monroe to life by providing a real world and
relevant perspective on business topics. Brad has an impressive twenty year career leading
transformational change on a global scale as an entrepreneur and private equity operating
executive. Brad has established himself as not only a sound operating practitioner but also a
thought leader in strategy, innovation, entrepreneurship, and international business and has
been a guest speaker or lecturer in China, Hong Kong, Paris, Brussels, Greece, London as well
as the United States. To maintain engagement and practical experience in business, Brad is
a consulting team leader or participant for some of the largest consulting firms in the world,
fortune 500, global 2000, and private equity venture capital companies. Currently, Brad is a consultant and pro-
fessor of management at the University of Louisiana Monroe where he endeavors to engage business and higher
education to solve real world problems.
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