**1. Introduction**

Innovation and Agility are hot topics. In 2023 a McKinsey & Company survey found that top Chief Executive Officers (CEOs) are confronting "a welter of uncertainties" so they need to find ways to make the most of novel opportunities—amid ongoing change [1] and, for many CEOs, "Agility ranks as a high strategic priority in their performance units" [2]. So, what are CEOs advised to do? New things need to be done (requiring Innovation) and opportunities need to be grasped prudently, effectively and quickly (requiring Agility).

Although arguable now more urgent, this message is not new. Innovation or Agility have been widely advocated as stand-alone organisational imperatives. For example, ter Haar [3] stated that: "(it) is broadly accepted in today's literature that (the) concept of innovation … is considered one of the essential ingredients of competitive advantage". Franco and Landini [4] assert that: "firm agility has recently emerged as one of the key organizational paradigms that managers should follow to build sustained competitive advantages and as a key critical business success factor".

Questions arise from such divergent claims that include: 'How do Innovation and Agility relate to corporate strategy?' 'Do Innovation and Agility have identical functions (i.e., purposes or deliverables)?' 'Is the work of innovating or being agile fundamentally the same?' 'Are Innovation and Agility interdependent theories of action?' 'Are there conditions where Innovation is a superior to Agility or vice versa?' 'What are the distinctive managerial challenges of undertaking Innovation or being Agile?' 'Are there situations in which either Innovation or Agility is a superior theory of action?' and 'Can Innovation or Agility be dysfunctional?'

Many of these questions concern the nature of the relationship between Innovation and Agility. It is this relationship that we investigate in this chapter. Our contribution has been derived from two main sources. First, from multiple research assignments undertaken by CENTRIM (the Centre for Research in Entrepreneurship Change and Innovation Management) in the University of Brighton (UK). Second, from extensive interviews analysing critical incidents in political life and business development with the second author (Woodcock) who was a UK Member of Parliament and is a highly successful entrepreneur and chairman of both commercial and not-for-profit enterprises.

The McKinsey & Company surveys that were mentioned above demonstrate that Innovation and Agility are quintessentially strategic capabilities as they: (i) are key topics for managerial study; (ii) are core capabilities needed by twenty first century organisations; (iii) require specialised managerial methodologies (more about this later) and (iv) directly affect an enterprise's capability to gain competitive of comparative advantage. In this chapter, for reasons of space, we will not consider how Innovation and Agility are positioned in different strategic models rather we assume that they fit into the Dynamic Capabilities framework [5].

The construct of Dynamic Capabilities provides the theoretical capstone for our study. This high-level construct was developed by David Teece, and colleagues, in the 1990s to explain why certain companies were consistently successful. Teece and Pisano [6] wrote that "winners in the global market-place have been firms that can demonstrate timely responsiveness and rapid and flexible product innovation, coupled with the management capability to effectively coordinate and redeploy internal and external competences". We can view 'timely responsiveness' and 'effectively coordinating and redeploying internal and external competences' as key deliverables required from Agility and 'rapid and flexible product innovation' as a key deliverable required from Innovation.

Helfat [7] succinctly described the function of Dynamic Capabilities as providing "a capacity of an organization to create, extend, or modify how the organization makes a living… Because capabilities are context-specific, there is no such thing as a generic dynamic capability that applies to all types of activities and settings". Research undertaken by the first author (Francis) found that certain dimensions of Dynamic Capability are so prevalent at a particulate moment in time that every top management team should assess whether these should be developed as core capabilities. We place Innovation and Agility in this category. Whether and how the capability should be developed depends on the distinctive driving force of the type of enterprise [8], product-market ambitions and the selected strategic posture of the enterprise [9].

As mentioned above, Dynamic Capabilities is a high-level construct. Many researchers have sought to unpick the construct by investigating its micro-foundations, which are the range of assets, components and processes that combine to provide enterprise-specific Dynamic Capabilities (that can be seen as analogous to the ingredients and recipe for cooking a gourmet meal).

### *Untangling the Relationship between Innovation and Agility DOI: http://dx.doi.org/10.5772/intechopen.112557*

The identification of micro-foundations of Dynamic Capabilities is important as these provide orientating concepts for middle-range theories that add agency to grand or high-level theories by enabling theoretical principles to be deployed in real situations. The relevance of middle-range theories was explained by Cartwright [10] who stated that "if we are concerned with explaining, predicting or managing the world… middle-range theories are generally the only game in town". The logic chain is this: grand theories provide a holistic perspective (that can be described as a 'gestalt'); middle-range theories enable development initiatives to be planned; theories of action clarify how development initiatives can be managed successfully.

In summary, in this chapter we will view Innovation and Agility as being different instruments for deploying specialised clusters of the micro-foundations of Dynamic Capabilities thereby contributing to the development of middle-range theories that offer methodologies for Dynamic Capabilities to be intentionally developed by leaders and managers. This positioning roots our study within the fields of Strategic Management, Organisation Development, the Sociology of Occupations and Management Development.

The following sections of this chapter are structured as follows:

