Early Efforts to Develop Absorptive Capacity and Their Performance Implications

Abstract

This paper examines efforts to develop absorptive capacity (ACAP) for new ventures and its performance implications. Being in their first years of existence, new ventures have the urgency to amass knowledge to compete, yet face severe resource limitations in trying to do so. The urgency and scarcity under which ACAP should be built varies between corporate ventures (CVs) and ventures created by independent entrepreneurs (IVs), affecting not only the emphasis their managers put on building different ACAP dimensions, but also their performance gains from ACAP dimensions. Using data from 140 new ventures, our results show that CVs emphasize potential ACAP (acquisition and assimilation of external knowledge) more than IVs. Conversely, IVs focus more on exploiting external knowledge. We also find that efforts to activate realized ACAP (transformation and exploitation of external knowledge) impair the performance of new ventures more for CVs than IVs. But this negative effect is mitigated when combined with efforts in potential ACAP in the case of CVs. These findings have implications for research into the multidimensional nature of ACAP and the dynamic capabilities approach while highlight the distinct and particular nature of firms at their early stages of development.