In the scholarly debate on how to deal with hypercompetition, a dominant logic has become that investing in ‘sensing’, ‘seizing’, and ‘transforming’ dynamic capabilities offers organization’s the potential to repetitively initiate business innovations. Actual research into the micro-foundations of these dynamic capabilities has been limited. This study explores whether modular organizing and lateral coordination are typical processes that support an organization’s sensing function. Empirically the study investigates how these two variables help The Netherlands armed forces to deal with its volatile crisis response environment. The findings show that both predictors stimulate the development of a broad knowledge base from which the organization can operationally benefit. Yet, the study has also uncovered that, when modularity's demand of organizational autonomy is not sufficiently satisfied, the organization becomes preoccupied with its own internal functioning at the expense of its external lateral sensing capacity.
