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Since the economic liberalization of 1991, India has witnessed a boom in the auto industry as well as the auto component industry. Such growth has resulted in the idea of innovation as an important parameter for survival and growth of firms. We argue that the organizational response requires a focus on discontinuous innovation, which has not been captured empirically in the Indian context. Disruptive Innovation (DI), a special kind of discontinuous innovations is a route for market dominance over the long term. An organization facing rapid change in the business environment, such as the Indian Auto sector, must have an ability to engage in DI. Further, we assert that the ability to adopt DI makes dynamic capability (DC) a critical requirement and as such we examine the DC-DI relationship and hypothesize it to be positive. A survey instrument is developed based on the extant literature and used to test the model with 107 responses from the firms affiliated to the Indian Auto Component Industry. The findings confirm the positive roles of DC, R&D expenditure and environmental turbulence as the antecedent to DI. Our exploratory analysis provides clarity concerning the crucial, but counterintuitive, roles played by R&D and environmental turbulence in moderating the relationship between DC and DI. The major contributions are: a) operationalization of DC and DI for the Indian context; b) sector specific study; and c) counterintuitive results pertaining to moderating roles of R&D and environmental turbulence on the positive relationship between DC-DI

Dynamic Capability, Disruptive Innovation, Automotive Sector, Emerging Economy, Indian Economic Liberalization