Absorptive capacity and NPD: salient issues in bipolar entrepreneurial SMEs

Abstract

PurposeThe purpose of this study is to explore knowledge absorptive capacity (ACAP) (both potential and realized) and new product development (NPD) in bipolar entrepreneurial small- and medium-sized enterprises (SMEs).Design/methodology/approachIn response to recent calls for research on knowledge ACAP and NPD in entrepreneurial SMEs, particularly in different contexts, this research aims to answer a specific question: What are the characteristics of ACAP (both potential and realized) and the salient issues concerning working complementarily between both types of ACAP to foster NPD in bipolar entrepreneurial SMEs (in this case, three new low-tech and three established high-tech cases)? The authors conduct case study research based on cross-case and within case analyses to answer the question.FindingsThe findings show that, in the established high-tech cases, realized ACAP plays an outsized role in developing new products and prior-related knowledge acts as a precondition for capturing useful knowledge from external sources (potential ACAP). On the contrary, in the new low-tech cases, potential ACAP is the key driver of NPD, so external knowledge from network ties becomes a crucial source of acquiring new knowledge, along with entrepreneurs’ level of skill at applying useful knowledge (realized ACAP) to achieve NPD.Research limitations/implicationsOn the basis of the bipolar entrepreneurial SMEs (i.e. established high-tech and new low-tech ventures), the characteristics of entrepreneurial SMEs (i.e. firm’s age, size and level of technology) affect the different roles of realized and potential ACAP in driving NPD successes. Realized ACAP plays a critical role for NPD in established high-tech SMEs, whereas potential ACAP is the main driver of NPD in new low-tech SMEs. This research has some limitations that future research should conduct quantitative research in other industries’ context as well as in other countries.Practical implicationsFor new ventures, they should be aware that to strengthen their network ties with customers and suppliers can be an important tool for not only overcoming their limitations of existing knowledge but also acquiring tacit knowledge from the external sources. For established high-tech ventures, they should focus not only on the short-term NPD (the achievement of current NPD) but also the long-term NPD (e.g. series of new products and new strategic alliances) that can help avoid a not-invented-here syndrome situation.Social implicationsThe government should customize the policy to suit each targeted SME. Policymakers should play a crucial role of a linking pin among key external sources (e.g. R&D national and international institutions, SME banks and marketing agents) in different stages of the business cycle.Originality/valueThis research contributes to the literature of knowledge ACAP in SMEs to the understanding of the distinction roles of potential and realized ACAP as a mechanism in the different natures of entrepreneurial SMEs.