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In order to understand better the organizational sources of continuous innovation, this paper provides an in‐depth analysis of Oticon A/S, a leading company in the hearing‐aid industry, which showed an impressive ability to develop new products in the nineties. Findings highlight that dynamic capabilities are made up of: knowledge creation and absorption, knowledge integration and knowledge reconfiguration. Discussion links the findings to previous literature and shows how these knowledge‐based processes are all based on a coherent mix of organizational resources.