Potential and realized absorptive capacities: Their effect on firms' competitive advantage and the role of communication

Abstract

Based on the resource-based view of the firm, this paper investigates the effect of potential absorptive capacity and realized absorptive capacity on the firm's competitive advantage with a sample of 286 corporations in China. Results indicate that both potential and realized absorptive capacities of Chinese corporations contribute to the firms' competitive advantage, yet realized absorptive capacity accounts for most of the contribution. In addition, by focusing on one single antecedent--communication, this paper is able to pinpoint the roles of three different levels of communication in absorptive capacity building. Ownership structure is also introduced as a moderating variable to refine the study. These results extend understanding of absorptive capacity by providing empirical evidence to existing theories and provide insights into Chinese corporations who are transforming into innovators.