Dynamic Capabilities and Sustained Innovations

Rolls-Royce plc is currently a powerful competitor in the turbofan engine industry, notwithstanding its own troubled history and the relative lack of international success of British companies in high-technology manufacturing over the past half- century. This paper seeks to contribute to the development of a theory of innova- tive enterprise by analyzing the roles of strategy and finance in sustaining the innovation process at Rolls-Royce over four decades from the mid-1960s. Through an analysis of ‘strategic control’ and ‘financial commitment’ as conditions of innovative enterprise at different stages in Rolls-Royce’s evolution, we adduce evidence that innovation depends in part on who strategic managers are and how they gain control over financial resources.