How lean routines shape a continuous improvement dynamic capability in hospitals

Purpose Despite the importance of dynamic capabilities (DCs) within organizations, our knowledge of how such capabilities emerge is still relatively limited. This paper aims to advance the microfoundations of DCs theory by exploring how deploying Lean practices can gradually develop into organizational routines and then, together, form a continuous improvement (CI) dynamic capability (DC). Design/methodology/approach We conducted a four-year retrospective process study in which we compared two Dutch university-based hospitals that had both started implementing Lean. Abductive cross-case analysis was undertaken based on the transcripts of 48 interviews, 13 frontline meeting observations, hospital documents and archival key performance data. Findings We identified how a staged process engaged top and cross-functional hospital leaders (including middle managers and frontline leaders) in capability development. This process gradually developed routines, which established four interconnected capabilities that, together, formed a hospital-wide CI DC: (1) a coherent improvement system, (2) hospital-wide collaborative synergy, (3) integrated accountability, linking strategy with daily operations, and (4) learning-to-learn among employees and teams. Originality/value A conceptual framework for developing strategic DCs is proposed. It enriches the microfoundations of DCs theory by explaining how evolving organizational routines may fuse, fostered by leaders across all hierarchical levels, which then can form a CI DC within the organization. The findings offer valuable insights for managers of large, knowledge-intensive organizations seeking to implement organization-wide improvement.