Individuals’ Perception of Organizational Capabilities in Times of Environmental Change

We investigate the drivers of individuals’ perception of organizational capabilities in times of environmental change. Prior research suggests that organizations need to reconfigure their capabilities in times of environmental change and that the outcome of this process is strongly affected by which (potential) capabilities organizational members are aware of in the process of organizational change. Thus far, however, there is a lack of studies that provide systematic, quantitative evidence of how organizational members differ in their perception of organizational capabilities and why. To address this shortcoming, we draw on unique data from a two-stage survey among 357 organizational members of an incumbent electric utility company during the energy transition to test which factors influence whether organizational members perceive capabilities associated with the new versus the old world. We show that individuals who perceive changes in organizational routines and a more exploratory ideal organizational identity are more likely to perceive novel capabilities. Contrary to expectations, we do not find evidence that differences in the perception of the current organizational identity explain differences in capability perception. Our study advances the literature on the micro-foundations of capabilities, which has started to investigate the relationship between cognition and capabilities. Moreover, by shedding light on the antecedents of capability cognition, our study bears important implications for the literatures on organizational change and identity.