An empirical study of firm’s absorptive capacity dimensions, supplier involvement and new product development performance

Abstract

Firms’ performance in their new product development (NPD) is believed to be positively related with involving suppliers in the process of new product development, and also with the organisation’s capacity and capability to absorb external and internal knowledge, namely absorptive capacity (AC). Addressing a gap in the literature, this study adopts the definition and structure for AC suggested by Tu et al. (2006) to examine relationships between AC’s sub-dimensions with NPD performance, and also their moderating effects on the relationship between supplier involvement and new product development performance, on both financial and nonfinancial aspects. Data from a survey of 161 manufacturing firms are used to test the developed hypotheses using structural equation modelling and hierarchical regression. Direct and contingent effects of supplier involvement and AC on new product development performance are studied. As a result factors determining AC are found of different level of effects on financial and nonfinancial performance of new products, which will have implication for theory and practice.