Higher Levels Of Absorptive Capacity Research Articles

KIBS deepening and manufacturers’ productivity: the moderating role of absorptive capacity

ABSTRACT The outcomes from the associations between manufacturers and knowledge-intensive business services (KIBS) with consequences at the firm and regional levels have been called territorial servitisation. This article explores whether the effect of regional KIBS deepening on productivity growth is dependent on minimum levels of manufacturers’ absorptive capacity. An econometric analysis was carried out using a threshold regression model of 125 Brazilian manufacturers collected from 2010 to 2017. Results indicate that KIBS deepening on its own does not bring productivity benefits. Manufacturers may collect positive gains if they are endowed with high levels of absorptive capacity.

When leaders and peers positively facilitate creativity: the moderating role of absorptive capacity

PurposeThis article explores the complementarity between leader encouragement of creativity and knowledge-sharing among peers in enhancing employee creativity in the hotel context. The authors further examine the role of absorptive capability in setting a contextual condition under which creativity affects employee performance.Design/methodology/approachA web-based survey and face-to-face interviews were a means of two-round data collection while using a partial least squares technique for model estimation.FindingsAn analysis of 277 employees showed that leader encouragement and knowledge-sharing are important for creativity to drive performance. At high levels of absorptive capacity, employee performance increases rapidly as creativity increases.Research limitations/implicationsThis article extends how the complementarity between leader encouragement and knowledge-sharing plays an important role in explaining employee creativity and performance under the boundary condition of absorptive capacity.Practical implicationsOrganizational managers could embrace a future creativity–performance strategy by developing absorptive capacity with reward systems to optimize employee performance.Originality/valueThis article substantiates the role of leader encouragement and knowledge-sharing in enhancing the relationship between employee creativity and performance. The strength of this relationship is dependent on the positive moderation of absorptive capacity.

Absorptive capacity, learning and profiting from outward FDI: Evidence from Canadian firms

The extant literature highlights a threshold productivity level firms are required to attain ex-ante in order to successfully undertake FDI. The current paper extends this framework by modelling a threshold productivity range which is below the required threshold productivity level. Firms in this range can successfully venture abroad when learning allows these firms to rise above that threshold productivity level, ex-post. Theoretical models which predict negative profitability for firms which undertake FDI when below the required threshold productivity level are extended to incorporate learning, and negative profits during the transition path turn positive once productivity increases above the threshold productivity level. The hypotheses developed are tested using panel data on firms operating in Canada over the period 2000 to 2014. These firm-level data include measures of productivity, firm size, R&D intensity, and when firms undertake outward FDI. We demonstrate that firms which venture abroad while in the threshold productivity range and also have sufficiently high levels of absorptive capacity, proxied by R&D intensity, are able to learn from their foreign experience, and hence increase their productivity levels, ex-post.

Capacities of local maize seed enterprises in Mexico: Implications for seed systems development

Where maize plays a critical role in food security, governments and donors have invested heavily in support of local, privately owned, often small and medium sized, maize seed enterprises (maize SMEs). Underpinning these investments are strong assumptions about maize SMEs’ capacity to produce and distribute seed to smallholders. This study assesses the capacities of 22 maize SMEs in Mexico that engaged with MasAgro—a large-scale development program initiated in 2011 that has provided maize SMEs with improved genetic material and technical assistance. Data were collected onsite from in-depth interviews with enterprise owners and managers and complemented with other primary and secondary sources. Overall, maize SMEs showed high levels of absorptive capacity for seed production, but limited signs of learning and innovation in terms of business organization and strategic seed marketing. Asset endowments varied widely among the SMEs, but generally they were lowest among the smaller enterprises, and access to business development services beyond MasAgro was practically nonexistent. Results highlighted the critical role of MasAgro in reinvigorating the portfolios of seeds produced by maize SMEs, as well as the challenges ahead for maize SMEs to scale the new technologies in a competitive market that has long been dominated by multinational seed enterprises. Among these challenges were limited investment in seed marketing, weak infrastructure for seed production, and limited experience in business management. Achieving the food security goals through maize SMEs will require making national maize seed industry development a strategic imperative.

The impact of servitization on the environmental and social performance in manufacturing firms

PurposeThis study aims to examine how servitization affects the environmental and social performance of manufacturing firms.Design/methodology/approachThe hypotheses are tested using fixed-effect panel models based on secondary data of 1,413 manufacturing firms publicly listed in the USA.FindingsResults show that servitization is positively related to the social performance of manufacturing firms; this positive relationship is more prominent under high levels of human resource slack. However, the impact of servitization on environmental performance depends on the level of absorptive capacity and human resource slack. Servitization improves environmental performance under high levels of absorptive capacity and human resource slack, while this positive impact is insignificant under low levels of absorptive capacity and human resource slack.Research limitations/implicationsThe study focuses on the degree (depth) of servitization but ignores the scope of services provided by manufacturing firms (breadth of servitization).Practical implicationsThis research suggests that servitization is an effective way of achieving simultaneous improvements in environmental and social performance. However, high levels of absorptive capacity and human resource slack are needed to achieve this goal.Originality/valueThis study contributes to the servitization literature by demonstrating the environmental and social sustainability benefits of servitization. The findings also highlight the crucial role of absorptive capacity and human resource slack on improving environmental and social performance through servitization.

Are heterogeneous customers always good for iterative innovation?

Are heterogeneous customers always good for iterative innovation? To address this question, building on the knowledge-based view and cognitive load theory, we investigate the impact of customer heterogeneity on software products’ iterative innovation and how such relationship changes with firms’ absorptive capacity. Using a dataset on software product iterative innovation of publicly listed firms in China from 2007 to 2019, the findings support our prediction that software products’ iterative innovation follows an inverted U-shape as customer heterogeneity increases, which indicates that a high level of customer heterogeneity impedes software products’ iterative innovation. Moreover, this nonlinear effect is moderated by a firm’s absorptive capacity such that the inflection point of the inverted U-shaped curve is shifted upward in firms with high levels of absorptive capacity, enhancing the impact of customer heterogeneity on software products’ iterative innovation.

The role of alliance portfolio diversity on firm innovation and performance: the case of Colombia

ABSTRACT This research aimed to understand the direct influence of a firm's alliance portfolio diversity on its product and process innovation performance and the indirect influence of the former on financial performance, mediated by innovation performance. To reach this goal, we proposed a model based on alliance portfolios and absorptive capacity theories and tested it in a sample of 806 Colombian manufacturing firms with structural equation modeling. The results supported the hypothesis that alliance portfolio diversity has a direct influence on product and process innovation and an indirect impact on financial performance. Product innovation, as expected, mediated this indirect relationship. On the other hand, process innovation did not. Another interesting finding was that, for high levels of absorptive capacity, the positive influence of diversity on innovation performance was more intense. This study contributes by extending the research of alliance portfolios in the innovation management field by understanding their phenomena under an emerging economy context.

Digital Innovation: Does distance matter in virtual cross-border R&D Alliances?

Our study examines the conditions under which cross-border digital innovation alliances are effective. Specifically, we investigate the moderating effect of technological, cultural, and geographic distance. The findings indicate that, although important, relative absorptive capacity is not a sufficient condition for effective collaboration in a cross-border, digital innovation context. Firms need to consider the optimum technological distance as well as the combined effect of technological distance with the effect of cultural and geographic distance. Specifically, a high level of cultural distance can be beneficial in combination with high relative absorptive capacity and low technological distance. Alternatively, a high absorptive capacity also leads to high digital intensity if both the cultural and the technological distances are low. Conversely, a high level of absorptive capacity does not yield positive results when the technological distance is high regardless of the degree of the cultural distance between the partner firms. Further, when the technological distance between two firms is low, a higher geographic distance may strengthen the positive impact of firms’ high absorptive capacity on digital innovation outcomes.

Export learning advantages through supplying multinational enterprises in emerging markets: a conceptual model

Previous research and available international trade data indicate that supplying multinational enterprises (MNEs) forms an important avenue for emerging markets increased involvement in export markets especially those previously dominated by MNEs. However, little is known at firm level how these forms of inter-firm transactions translate into export learning advantages for emerging market firms (EMFs) that are new to international business. Building on the relational embeddedness framework, RBV and dynamic capability framework, this paper presents a conceptual model of export learning advantages of EMFs supplying MNEs. It is argued that the duration of the supplying relationship in these inter-firm exchanges as well as the level multiplexity of these ties would more likely facilitate than inhibit export learning advantages for the less internationally experienced EMFs when they possess differentiation competences as opposed to low-cost competences. Similarly, high levels of absorptive capacity are observed as critical for the less internationally experienced EMFs supplying MNEs to effectively identify, capture and sustain export opportunities beyond the initial supplying requirements of the focal MNE customer(s).

Relationship between User Innovation Activities and Market Performance: Moderated Mediating Effect of Absorptive Capacity and CEO’s Shareholding on Innovation Performance

Although user innovation has been regarded as an important source of firms’ competitive advantage, the internal processes and mechanisms involved in the relationship between firms’ user innovation activities and market performance are seldom studied. By applying moderated mediation analyses, we examine (1) whether firms’ user innovation activities have a positive impact on market performance and (2) how and under what conditions user innovation activities can have a positive impact on a firm’s market performance. The findings on a sample of Korean manufacturing firms indicate that user innovation activities significantly increase firms’ innovation performance, which consequently leads to superior market performance (confirming the mediation effect of innovation performance). Additionally, we observe the positive mediation effect of innovation performance only in firms with higher levels of absorptive capacity (confirming the moderated mediation effect of absorptive capacity). Further analysis confirms that the positive interaction effects between user innovation activities and absorptive capacity on market performance through innovation performance were more pronounced for firms with higher Chief Executive Officer (CEO) shareholding levels (confirming the moderated mediation effect of CEO’s shareholding). Our findings provide theoretical and practical implications on the successful implementation of user innovation strategies.

Enterprise Social Software Platforms and Team Improvisation

ABSTRACT Enterprise social software platforms (ESSPs) have emerged as an important infrastructure that enables teams to perform in the turbulent business environment. The current study adds to the scanty literature on ESSP by revealing and confirming the underlying mechanisms through which ESSP contributes to a team’s ability to improvise. By surveying current ESSP users, we find that ESSP exercises its effect on team improvisation ability through team social capital as an important mediator. However, our results confirm the existence of two distinctive mediation mechanisms. First, intra-team ESSP use shapes improvisation ability through a team’s internal bonding social capital partially, whereas inter-team ESSP use contributes to improvisation ability through external bonding social capital fully. Second, intra-team (not inter-team) ESSP use casts an additional impact on improvisation ability through within-team (not outside-team) bridging social capital; however, this mediation effect exists only among teams that are equipped with a high level of absorptive capacity. Therefore, the current research sheds new lights on the ESSP and contributes to the research on information technology–assisted team improvisation. Our findings also inform practitioners in leveraging ESSP for enhancement of the improvisation ability of teams in the workplace.

Dimensions of Entrepreneurial Orientation and SME Performance: Moderating Effect of Absorptive Capacity of the Firm

This paper investigates a model of SME performance based on the dimensions of entrepreneurial orientation and absorptive capacity of the firm. The model tested the direct effects of innovativeness, risk-taking and proactiveness on firm performance and the moderating role of absorptive capacity on the relationship between the dimensions of entrepreneurial orientation and firm performance. Structural equation modelling with multi group analysis was used to test the model in the context of small and medium scale hotel and restaurant industry in Sri Lanka. Results indicate that highly entrepreneurial-oriented SMEs with high level of absorptive capacity achieve higher level of performance.

Agglomeration, Absorptive Capacity and Knowledge Governance

This paper considers the role of firm ownership structure, absorptive capac-ity and agglomeration on firm innovation in the Chinese context. A popular co-occurrence measure is used to measure local spillovers expected to take place between similar but different industries co-located together. Relying on a large panel of Chinese firms, this paper offers three main results: (i) privately-owned enterprises (POEs) are more efficient innovators than their state-owned enter-prise (SOE) counterparts; (ii) local spillovers from related industries enhance firm innovation, especially for firms with higher pre-existing learning abilities; and (iii) despite possessing relatively high levels of absorptive capacity, POEs maintain higher innovation performance compared to their SOE counterparts. These findings help confirm the absorptive capacity thesis, but also suggest that possessing relatively higher levels of absorptive capacity, in and of itself, is not always a sufficient pre-condition for firms to overcome all of the cognitive and technological barriers to leveraging external sources of knowledge. In line with theories of knowledge governance, one explanation for this finding is that private (government) operators develop higher (lower) quality governance procedures that ultimately enhance (hamper) their ability to successfully integrate external sources of knowledge even after developing a high level of absorptive capabilities.

Does spatial proximity raise firm productivity? Evidence from British manufacturing

AbstractThe UK’s economy is one of the most regionally imbalanced in Europe. The government’s recent industrial strategy discusses various means of addressing this, one of which is the strengthening of existing clusters. Using plant-level indices of spatial proximity derived from postcode district data, this article investigates the extent of spatial concentration and its impact on total factor productivity in advanced manufacturing sectors in Great Britain. The results from estimation of production functions indicate that, in most advanced manufacturing sectors, spatial concentration has a negative impact on productivity in small plants and a positive effect in larger plants. Large plants likely benefit more from knowledge spillovers due to their higher levels of absorptive capacity.

Agglomeration, absorptive capacity and knowledge governance: implications for public–private firm innovation in China

ABSTRACT This paper considers the role of firm ownership structure, absorptive capacity and agglomeration on firm innovation in the Chinese context. A popular co-occurrence measure is used to measure local spillovers expected to take place between similar but different industries co-located together. Relying on a large panel of Chinese firms, this paper offers three main results: (1) privately owned enterprises (POEs) are more efficient innovators than their state-owned enterprise (SOE) counterparts; (2) local spillovers from related industries enhance firm innovation, especially for firms with higher pre-existing learning abilities; and (3) despite possessing relatively high levels of absorptive capacity, POEs maintain higher innovation performance compared with their SOE counterparts. These findings help confirm the absorptive capacity thesis, but also suggest that possessing relatively higher levels of absorptive capacity, in and of itself, is not always a sufficient precondition for firms to overcome all the cognitive and technological barriers to leveraging external sources of knowledge. In line with theories of knowledge governance, one explanation for this finding is that private (government) operators develop higher (lower) quality governance procedures that ultimately enhance (hamper) their ability to integrate successfully external sources of knowledge, even after developing a high level of absorptive capabilities.

The role of subsidiary learning behavior and absorptive capacity in foreign subsidiary expansion

We examine how subsidiaries can implement business expansion successfully to capitalize on growth potentials. Building on our baseline hypothesis, which examines the effect of the extent of business expansion on subsidiary divestment, we identify the boundary condition of the tendency of subsidiary’s learning behavior in foreign expansion. Specifically, we argue that subsidiaries that expand multiple businesses through competence-creating learning behaviors are more likely to be divested due to increasing complexity. We further suggest a remedial condition to offer a viable approach to implement business expansion through competence-creating learning successfully. Based on a sample of 6040 foreign subsidiaries operating over 14 years, we show that affiliates are more likely to expand into unfamiliar business domains successfully if they have a higher level of absorptive capacity.

THE MEASUREMENT OF ABSORPTIVE CAPACITY FROM AN ECONOMICS PERSPECTIVE: DEFINITION, MEASUREMENT AND IMPORTANCE

AbstractThis paper starts by recognizing that despite the importance of absorptive capacity, economists in particular have made only limited use of the concept. Most theoretical and empirical studies derive from other fields of research. Thus, the first task is to compare and contrast the different approaches taken in measuring absorptive capacity. The rest of the paper then sets out an example of how typically economists have proceeded, using nationally representative CIS data to measure absorptive capacity across a 10‐year period and investigating if it remains stable in the long term. This is followed by considering how firms’ characteristics vary across lower to higher levels of absorptive capacity and whether such capacity determines firms’ productivity performance across both goods and service industries. Our results show that relative to other influences, absorptive capacity as measured here — net of the impact of foreign‐ownership and human capital — has a substantial influence on exporting, innovation and undertaking R&D and thus consequently firm‐level productivity. Finally, there is a discussion of why governments should consider helping firms to boost their levels of absorptive capacity.

Exploring the impact of the level of absorptive capacity in technology development firms

Absorptive capacity (ACAP) is widely recognized as an effective means of obtaining and sustaining a competitive advantage. Although ACAP was globally introduced decades ago, researchers from Central and Eastern Europe have since underestimated its importance. The research objective of this paper is to answer the following questions: how does the level of ACAP influence the performances of technology-driven firms, and how does it catalyse their innovation outputs? Furthermore, we argue that exporting technology-driven firms possess even higher levels of ACAP than those who are weak or not-at-all exporters. ACAP measured value is examined alongside the innovation outputs of firms and their business performance, with an extended focus on exporters. A selected population of >600 Croatian firms were asked to fill in the questionnaire. Out of the 103 firms that completed the survey, 45 were recognized as intensive technology development performers, and 34 were identified as large exporters. Both populations were tested against formulated hypotheses, ultimately proving that higher levels of ACAP can be seen to positively drive innovation performance which, notably, can be seen most clearly with exporters.

Performance implications of organizational ambidexterity versus specialization in exploitation or exploration: The role of absorptive capacity

Although ambidexterity is usually cited as a mean to achieve above average sustainable performance, theory indicates that due to trade-offs between exploitation and exploration at an organizational level, sometimes ambidexterity may be beyond reach, or ineffective, making specialization in exploitation or exploration, the more advisable course of action. However, there is no empirical research comparing the performance implications of ambidexterity and specialization in exploitation- or exploration-based types of innovations and the factors that may make each strategy more favorable. To fill this gap, we empirically test that absorptive capacity moderates the effects of ambidexterity and specialization in exploitation or exploration on firm performance. Using a sample of 281 manufacturing companies, results indicate that ambidexterity has a greater effect on performance at high levels of absorptive capacity, while specialization in exploitation or exploration is more effective at low levels of absorptive capacity.

Performance consequences of social capital in online communities: The roles of exchange and combination, and absorptive capacity

Many organizations support online communities of practice (OCOPs) as part of their knowledge management strategies. Despite some prior investigation of the potential benefits of OCOPs, the effects of OCOPs on behaviors and performance outcomes are not well understood. Drawing on social capital theory and absorptive capacity literature, this paper addresses three research questions: (1) How does social capital influence exchange and combination behaviors in online communities of practice? (2) How do exchange and combination behaviors affect the performance of individuals and the OCOP? (3) How does absorptive capacity moderate the impact of exchange and combination behaviors on individual and OCOP performance? The empirical study is based on online survey data from 253 participants in OCOPs and qualitative analysis of online postings. The results indicate that cognitive and structural capital facilitate exchange and combination behaviors in OCOPs, but relational capital does not. Moreover, exchange and combination behaviors facilitate the performance of individuals as well as the OCOP, and a higher level of absorptive capacity enhances these effects. The findings are discussed in detail, along with their theoretical and practical implications, and directions for future research.