Enhancing Organizational Knowledge: The Antecedents of Potential and Realized Absorptive Capacity

Abstract

Only a handful of the organizational level studies examine the antecedents of absorptive capacity. My project aims to fill this gap by focusing on external and internal mechanisms affecting two dimensions of absorptive capacity: potential absorptive capacity and realized absorptive capacity. First, I propose that when firms have more developed external networks providing a broader inflow of information from the outside, firms also develop stronger, externally-oriented, potential absorptive capacity (PACAP). Second, I propose that when firms develop more effective intra-organizational communication facilitating better internal dissemination of information, firms also develop stronger, internally-oriented, realized absorptive capacity (henceforth, RACAP). Third, I focus on the interaction between those two mechanisms in the context of each dimension of absorptive capacity. Consequently, I posit that the moderating effect of the interaction between the influx of new information and the effective internal dissemination of information will determine the strength of PACAP and RACAP. The empirical analysis is based on data collected at 58 hospitals located in 12 States throughout the United States. The data support the hypothesis. The results reveal that both external and internal mechanisms matter. They also indicate that the interaction between the influx of new information (external networks) and internal dissemination of such information (intra-organizational communication) plays a key role in the context of absorptive capacity, as it affects the strength of the organizational ability to acquire, assimilate, transform and exploit knowledge. Consequently, the study provides valuable insights for firms aiming to reinforce their absorptive capacity, or find a proper balance between their “outward” and “inward” looking organizational functions.