Year 2005 was an important milestone for the Indian pharmaceutical companies. With the start of the year, Indian pharmaceutical companies had to fall in line with its commitments to the World Trade Organization (WTO). The strategies pursued by the firms for the past 40 years after the implementation of the Indian Patents Act, 1970 must be reviewed for its relevance in the changed context. Current literature in strategic management focuses on dynamic capability as a source of competitive advantage. Earlier studies focused their attention on direct relationships among a few selected factors only; therefore the lack of clarity can be traced to under-specification of the models that the previous studies have examined. Specifically, studies provide limited view of change capability by ignoring the constituting factors which should be integrated. Dynamic capability as a construct involves framework for managing knowledge, ability to combine the existing and acquired knowledge and leveraging knowledge through learning for innovation. Every firm learns through firm-specific methods, and this learning process is operationalized by the firm’s knowledge management practices that result in successful learning. Using change capability as a mediator, a model to understand the drivers of competitive advantage in the Indian pharmaceutical industry is developed.

The environment in which the firms are operating today is unpredictable, chaotic and turbulent. The nature and pace of change in the contemporary context is characterized by spontaneity. The very nature of competition in all industries which are driven by the forces of change has grown in exponential fashion in terms of complexity. In the light of this unpredictable and multifaceted competitive intensity, reorientation in the philosophy for achieving sustained Competitive Advantage (CA) is inevitable. The ever-increasing business dynamism is presenting new challenges before managers, practitioners and researchers, wherein they are trying to establish new sources of dynamic fit among the requirements imposed by the changing context.

In the past decade, researchers have persistently focussed their attention on the significant role played by the dynamic capabilities and everyone has significantly contributed in their own way towards understanding the contribution of this construct towards CA. Dynamic capabilities are needed in the dynamic markets and therefore the resource-based view of firm in the changing context should focus on the managerial ability to integrate, build and reconfigure competencies to address the rapidly changing environments for sustained CA. Leveraging knowledge for CA is now acknowledged widely by the mainstream researchers in the area of strategic management. But the roots of the problem lie in exploiting the knowledge resources for taking lead and achieving competitive superiority. Managers of all organizations are well versed with the fact that knowledge leads to competitive superiority; therefore, organizations must strive continuously to learn and innovate. Organizations must have tangible and intangible systems to combine and exploit the existing and potential sources of knowledge. Still, a cohesive and integrative framework to understand the interwoven complexities is somewhere lacking.

Year 1990 onwards, the changed face of competition has placed ever-increasing demand on firms to adapt, renew, reconfigure and recreate their resources and capabilities in line with the competitive environment. Organizational flexibility is now an established rule for survival in the market place. Pharmaceutical industry presents an excellent platform to address and investigate the issues of what drives Change Capability (CC) and what is its impact on CA. An agile organization can achieve CA by targeting its people and processes to the continually changing needs of the market place with the support of the knowledge it possesses, by its ability to learn and innovate and also with systems which facilitate effective combination of the abilities and resources. Based on this conceptual premise, a model is developed which includes determinants of organizational change capabilities, viz., Knowledge Management Framework (KMF), learning and innovation and combinative capabilities, their synergistic effects on change capabilities and its ultimate impact on CA.

The scheme of the paper is as follows. First, we discuss the theoretical underpinnings of our study and the key theoretical constructs pursued. Second, we describe our research model, then deal with the organizational setting, data collection and the analysis of the quantitative data that we collected. The implications of the findings are discussed and conclusions are drawn from this analysis. The conclusion points to further research directions.

Business Strategy Journal, Change and Competitive Advantage, An Investigative Study, Indian Pharmaceutical Industry, World Trade Organization, Competitive Advantage, Change Capability.