Explaining Knowledge Mismatch: When Organizational Control Is Mistaken for Strategic Change in Dynamic Capabilities

Abstract

How can strategic success and strategic failure coexist within the same organization at the same time? Organizations may respond to external change by producing an internal strategic response that becomes self-referential: the response is monitored, resourced, and reported as progress, while the external change it was meant to address remains unanswered. This conceptual paper combines established theories from the dynamic capabilities, strategy diffusion, and absorptive capacity literatures, whose interaction reveals more than any single perspective alone. The conceptual approach is necessary because the condition may be invisible from within: the organization's own monitoring system cannot distinguish the strategic response from substantive renewal. Without theoretical intervention, identifying what is occurring and what should change may not be possible. Following Jaakkola's (2020) model type research design, the paper explains why the strategic response can turn inward: rather than addressing the external change that triggered it, the response targets the organization's own structures, producing administrative control that is interpreted as strategic progress. The research problem was identified through problematization: the inertia literature treats inertia as absence of action, while this paper identifies inertia manifesting as active, strategically justified action that produces measurable outputs at every stage. The model does not predict inevitabilities but identifies possibilities that existing theory permits. The paper develops three cumulative propositions. The first demonstrates that administrative control accumulates and is interpreted as strategic progress even when substantive renewal capacity does not increase. The second identifies boundary-spanning micro-contexts as sites where explorative knowledge can emerge outside management's cognitive framework. The third shows that control responses obstruct the preconditions for diffusion from these micro-contexts. The paper contributes to dynamic capabilities theory by identifying the model's process agnosticism as a structural property that permits exploitative execution to remain invisible. It extends strategy diffusion theory to intra-organizational micro-contexts and demonstrates that PACAP and RACAP can develop with contradictory orientations at different organizational levels simultaneously. For knowledge management, the paper reframes the problem from knowledge transfer to knowledge recognition, identifying an internal post-truth condition in which the formal system measures its own assumptions rather than the organization's actual responsiveness to change.