Effects of absorptive capacity and innovation spillover on manufacturing flexibility

José Pinheiro,Luis Filipe Lages,Graça Miranda Silva,Miguel T Preto,Alvaro Lopes Dias

doi:10.1108/ijppm-04-2020-0156

Abstract

PurposeShifting demand and ever-shorter production cycles pressure manufacturing flexibility. Although the literature has established the positive effect of the firm's absorptive capacity on manufacturing flexibility, the separate role of the innovation competencies of exploitation and exploration in such a relationship is still under-investigated. In this study, the authors examine how these competencies affect manufacturing flexibility.Design/methodology/approachThe authors use survey data from 370 manufacturing firms and analyze them using covariance-based structural equation modeling (CB–SEM).FindingsThe results indicate that absorptive capacity has a strong, positive and direct effect on exploitative and exploratory innovation competencies, proactive and responsive market orientations, and manufacturing flexibility. The authors’ findings also demonstrate that the exploitative innovation competencies mediate the relation between responsive market orientation and manufacturing flexibility. Essentially, these exploitative innovation competencies produce a direct positive effect on manufacturing flexibility while simultaneously being a vehicle for absorptive capacity's indirect effects on it. An exploration innovation strategy does not significantly affect manufacturing flexibility.Originality/valueThis study contributes by combining key strategic features of firms with manufacturing flexibility, while providing new empirical evidence of the mediation of the exploitative innovation competencies in the relation between responsive market orientation and manufacturing flexibility.

Highlights

Manufacturing flexibility has become relevant to achieving a competitive advantage for firms in the contexts of volatile demand and high competition (Ojha et al, 2015; Patel et al, 2012; Tamayo-Torres et al, 2014)
The results indicate that absorptive capacity has a strong, positive, and direct effect on exploitative and exploratory innovation competencies, proactive and responsive market orientations, and manufacturing flexibility
The findings show that firms seem to enhance manufacturing flexibility through absorptive capacity and a combination of a responsive market orientation and their exploitative innovation competencies

Summary

Introduction

Manufacturing flexibility has become relevant to achieving a competitive advantage for firms in the contexts of volatile demand and high competition (Ojha et al, 2015; Patel et al, 2012; Tamayo-Torres et al, 2014). Among the capabilities important for the development of manufacturing flexibility are absorptive capacity and ambidexterity (Patel et al, 2012). Patel et al (2012) states that each firm’s absorptive capacity is context contingent and unique that enhances the firm’s returns through the better alignment of manufacturing flexibility with the environment. While absorptive capacity supports the recognition, assimilation, and transformation of new knowledge, ambidexterity uses such knowledge for both exploitation and exploration (Patel et al, 2012). They find that ambidexterity is key to achieving increased returns from manufacturing flexibility. The suggested mechanism that explains this result is that ambidexterity helps to channel the firm’s learning efforts by harmonizing the optimization of existing routines and processes with the development of new routines and processes, which ensures continuity (Mishra, et al, 2014)

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