Illuminating the Relationship Between Absorptive Capacity and Firm Performance: A Meta-Analysis

Abstract

A firm’s ability to identify, assimilate, transform, and apply knowledge, i.e. its absorptive capacity, is vital for creating a competitive advantage. Despite the importance of absorptive capacity for firm performance, it is still unclear how the relationship between absorptive capacity and firm performance exactly looks like. According to initial claims this may be due to a lack of coherence between the definition and measurement of absorptive capacity. Drawing on the resource-based and the dynamic-capabilities perspectives we conduct a meta-analysis to test how applied measurements and contextual factors alter the relationship between absorptive capacity and firm performance. Our findings from 151 individual studies confirm a positive relationship, while the effect size varies depending on how absorptive capacity and firm performance were measured. Absorptive capacity measured as a multidimensional, dynamic capability displays the strongest relationship with firm performance. We offer a new perspective on absorptive capacity by drawing attention to the conceptual differences between absorptive capacity measurements, in particular the role and dynamic reconfiguration of knowledge stocks and flows, and by displaying how these differences impact the observed relationship between absorptive capacity and firm performance. Our key contribution is to illuminate the factors which influence the relationship between absorptive capacity and performance.