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The ways in which CEOs learn, apply what they have learned, and make decisions are significant to the innovative capabilities of subject matter experts (SMEs), states Jutta Mäkipelkola in her doctoral dissertation at the University of Vaasa, Finland. Her research reveals how the skills of CEOs shape the capabilities of SMEs—and what kind of organizational culture drives innovation.

The importance of capabilities that enhance the innovativeness and renewal of companies has become more apparent during uncertain times, when the operating environment can change rapidly. However, the ways that different capabilities are formed within companies have received little attention in research.

To better explain how companies' capabilities are formed, Mäkipelkola examined in her doctoral dissertation in strategic management how the CEOs of SMEs operating in the food industry influence the development of their company's capabilities. In the study, she focused on both operational capabilities, such as product development and production, and dynamic capabilities, such as renewing operations through acquiring and utilizing new knowledge.

"The study identified three managerial mechanisms—learning, reflection, and alignment—which strongly explain the development of capabilities in SMEs. These refer, among other things, to managers' ability to learn, their openness to learning, and their ability not only to align what has been learned with the company's mission and resources, but also to make decisions. The identified managerial mechanisms played a significant role in all the innovative companies involved in the study," says Mäkipelkola, who will defend her dissertation at the University of Vaasa on 9 April.

Innovative companies have a culture of experimentation and extensive networks

Mäkipelkola's doctoral research offers SME managers recommendations for building capabilities to support business development. In addition to highlighting key managerial mechanisms and the competencies required of them, the study reveals what kind of organizational culture supports innovation and what kind of network enables managers to drive renewal.

"In innovative companies, there is permission to experiment and to learn through mistakes, and the CEO is present and approachable. They have, for instance, a strong understanding of the company's mission, resources, and value chains, as well as solid skills in product and service development. CEOs' ability to seek out innovative partners and build networks also helps lay the foundation for the development of capabilities," Mäkipelkola says.

Mäkipelkola's research data consisted of 36 individual interviews conducted between 2014 and 2022. The interviews involved experts and CEOs from four Finnish SMEs in the food industry.