Social Capital and Sustainable Innovation in Small Businesses: Investigating the Role of Absorptive Capacity, Marketing Capability and Organizational Learning

Abstract

Facing resource constraints and fierce competition, it is relatively difficult for small firms to achieve product innovation to gain sustainable development independently. Previous studies have explored the positive relationship between social capital and product innovation, yet there is still a lack of a comprehensive understanding of the underlying mechanism and the boundary conditions. Drawing upon the dynamic capabilities framework, we expect that absorptive capacity and marketing capability will mediate the relationship between social capital and new product development. Moreover, since product innovation is considered a process of learning, we also examine the moderating effects of explorative learning, and exploitative learning within moderated mediation models. Employing a sample of 221 small firms based in China, we find that social capital is indeed positively associated with new product development and is simultaneously fully mediated by absorptive capacity and marketing capability. Furthermore, the impact of absorptive capacity on new product development is amplified when a condition of explorative learning exists. This study, therefore, advances the current understanding on the predictors of innovation and enriches the dynamic capabilities theory, and also provides empirical support for the sustainable development of small firms.