Abstract

This article examines the theoretical foundations of an organization's dynamic capabilities—sensing, seizing, and transforming—from the perspective of organizational knowledge creation. Making a distinction between the creative and adaptive aspects of dynamic capabilities, this article argues that the foundation of creative aspect is 'meso:' it stems from team-level interactions of frontline workers' capabilities facilitated by middle managers, rather than from individual-level (or micro-level) capabilities. In this middle-up-down management model, top management sets the vision of the organization, but middle managers grasp and solve the gap between the top and the frontline by facilitating team-level dialectic interactions of employees. The leadership practices of both top and middle management that facilitate this process are illustrated with four Japanese multinational companies—Fujifilm, Eisai, Mayekawa Manufacturing, and Toyota.

Keywords: organizational knowledge creation theory; dynamic capabilities; middle-up-down management; wise leadership; phronesis; multinational enterprise; Organizational Change and Adaptation; Multinational Firms and Management; Management Practices and Processes; Creativity; Organizational Structure; Knowledge;