Introduction

With the advancement of information technologies, company strategy focuses nowadays on sustainable competitive advantage, and gives importance to short-term advantages of flexibility and fast response. As a result, flexibility is accompanied by reorganization of resources and skills, strategic cooperation, and centrifugal hierarchical structure (Grant and Jordan, 2012). A company aims to absorb or exploit uncertainty through flexibility (Cannon and John, 2004). Flexibility is relevant to a company’s ability to respond to uncertainty in both macro and micro environmental scope, while product innovation is a reaction to competitive environment. Uncertainty has a substantial role in strategic decision-making processes. Uncertainty within the industry increases the risk and ambiguity for new-product decisions. It is a direct result of inability to forecast the direction and content of change (Thomas, 2014; Chari et al., 2014). In this context, product innovation is also a key tool to cope with uncertainty and sustainable competitive advantage. In this context, companies need innovative products for their markets. They also seek coherent structure, resources, and processes to support product innovation. In the literature, strategic flexibility mostly relates to uncertainty. Only a few research studies (Sharma and Jain, 2010; Oke, 2013) focus specifically on the effect of strategic flexibility on product innovation. Previous research has focused on either one function or the whole organization, and has not shown comparative contributions by departments to strategic flexibility. This research fills that gap by examining the effect of three functional areas together, and aims to examine the level of their individual contribution to strategic flexibility configuration. Finally, the study also differs from previous ones in the methodology it applies, as it investigates the relationship between strategic flexibility and product innovation in qualitative terms. In the first part, we determine strategic flexibility configurations and subindicators of strategic flexibility. Production, marketing, and human resources (HR) departments hold the key indicators for analyzing strategic flexibility. In the second part, we examine whether and how strategic flexibility configurations characterize product innovation.