Internal Absorptive Capacity Research Articles

Exploring the Roles of Social Networks and Absorptive Capacity in Local Firms’ Strategic Flexibility: An Empirical Investigation of Chinese Firms

In an era of VUCA, strategic flexibility may play a greater role for a company to achieve competitive advantage than innovation. Based on an integrated social network and absorptive capacity perspective, this article proposes a conceptual model in which the local firm’s strategic flexibility is affected by its position in global production network and its internal absorptive capacity. Using a sample of 276 local manufacturers located in the Yangtze River Delta, China, the roles of social networks and absorptive capacity in strategic flexibility are identified, and the results indicate that by occupying a central and strong-tie-abundant network position, local firms can gain more resource flexibility; and absorptive capacity possessed by a local firm plays an active role in coordination flexibility.

The enterprise's external knowledge acquisition capability and technological diversification: From the perspective of intellectual property strategy.

Enterprises need intellectual property rights to protect their core knowledge, and technological diversification is an important strategic measure for enterprises to improve innovation performance. From the perspective of external resource acquisition, this study explores the mechanism of external knowledge acquisition capability (internal absorptive capability and external relational learning) on firm's technological diversification. It considers the impact of firm's innovation capability and external environmental uncertainty. The survey data of 258 Chinese pharmaceutical companies were obtained through questionnaire surveys, and various theoretical hypotheses were validated using regression analysis methods. The results show that internal absorptive capacity, external relational learning, and their interaction have a significant positive impact on technological diversification; the innovation capacity and the uncertainty of the external environment also affect enterprises' technological diversification.

Configurational paths for SMEs’ innovation: focusing on information resources, absorptive capacity, and government support

ABSTRACT The purpose of this study is to reveal the paths of how absorptive capacity and government support combine for SMEs to create innovation performance based on external information resources. In addition, this study investigates the configurational paths for SMEs’ innovation creation depending on their industrial environment by comparing analyses of industry types. This study used data from 1,421 Korean SMEs in the manufacturing sector based on the 2018 Korea Innovation Survey data and conducted a fuzzy-set qualitative comparative analysis (fsQCA). The results show that four product innovation paths and two process innovation paths in the high-tech industry, and six product innovation paths, and four process innovation paths in the low-tech industry exist. This study presents the academic contributions by identifying the configurational paths of the factors based on the resource-based view, dynamic capability, and contingency theory. In addition, it shows that by comparing industry types that reflect technological characteristics, the direction of innovation activities and the path to generating innovation performance vary depending on the business environment to which SMEs belong. Therefore, managers and policy makers must consider the different industrial environments of SMEs when combining external information resources, government support, and internal absorptive capacity to create innovation.

Too little or too much of good things? The horizontal S-curve hypothesis of green business strategy on firm performance

Building on the tenets of the combination of institutional and resource-based views, this study aims to shed light on how a firm could benefit from implementing a strategic stance toward exploiting green-related opportunities. Our model integrates ‘too-much-of-a-good-thing’ (TMGT) and ‘too-little-of-a-good-thing’ (TLGT) effects to formulate green business strategy and how this, in turn, influences substantive performance. The association is empirically manifested in a horizontal S-curve, which at first shows that firm performance declines with initially going green, follows by a positive relationship between increasing green business strategy and firm performance, then declines at very high levels of green pursuit. Additionally, the S-curve relationship between green business strategy and firm performance is positively moderated by internal absorptive capacity and external public environmental concern. These findings offer relevant information for a finer-grained interpretation of how and when it pays to be green.

Scrutinizing innovation performance of family firms in efficiency-driven environment

Although family firms constitute the bulk of economic activity in many world economies, their behavior is still far from understood. This is particularly true when it comes to innovation activities of family firms in efficiency-driven environments with limited indigenous innovation potential, low quality of innovation systems and weak innovation policies. The sample consisting of 293 family firms and we reveal that in such setting internal competencies, collaboration, and public support facilitate innovativeness and diminish the negative effects of firm maturity and innovation barriers among family firms. Tacit R&D knowledge and internal absorptive capacity outweigh the negative effects on innovation of family firms.

Strategic Network Orchestration in Emerging Markets: China's Catch‐up in the High‐Speed Train Industry

AbstractTransitioning from catch‐up in production to catch‐up in innovation capabilities is essential to emerging market firms (EMFs) achieving internationalization and a competitive advantage. While some EMFs are now positioned among the world's most advanced firms, many struggle to become independent innovators. Thus, understanding how EMFs can develop internal absorptive capacity and progress towards catching up in innovation capabilities remains important. Our study seizes this research opportunity and develops a network‐based explanation of catch‐up, which complements existing technological and organizational explanations. Specifically, we address the question of ‘How does the orchestration of collaborative networks enable EMFs to catch up in production and innovation capabilities?’ by describing an important yet under‐researched process of strategic network orchestration and showcasing the dynamic interdependencies between network orchestration and organizational learning. Our study provides a detailed account of Chinese high‐speed train (HST) development from 1990 to 2020 and opens the possibility for future research on network orchestration in emerging market contexts. This provides EMF managers with a set of actionable network orchestration mechanisms that can be used when designing and purposefully managing their strategic nets of domestic and foreign partners.

INTER-ORGANISATIONAL COLLABORATION AND BUSINESS MODEL INNOVATION: THE JOINT MODERATING EFFECTS OF ABSORPTIVE CAPACITY AND COLLABORATION DEPTH

Informed by the knowledge-based theory of the firm, the study explores how internal absorptive capacity and external inter-organisational collaboration jointly promote business model innovation (BMI). Drawing on the relevant existing literature, a model linking collaboration breadth, collaboration depth, absorptive capacity, and BMI was constructed and tested. Hierarchical multiple regression analysis of the results of a questionnaire-based survey of 317 senior managers in manufacturing firms revealed that both collaboration breadth and collaboration depth are positively related to BMI. Collaboration depth has no significant moderating effect on the collaboration breadth–BMI relationship, and absorptive capacity has no significant moderating effect on relations between BMI and collaboration breadth or collaboration depth. However, the joint moderating effects of absorptive capacity and collaboration depth on the collaboration breadth–BMI relationship were positively significant. These results have a number of implications for research on BMI and innovation management and for the development of knowledge-based theory.

Hierarchical business value of information technology: Toward a digital innovation value chain

Information technology (IT) increasingly changes the ways through which firms develop and commercialize innovation. Prior studies have mainly focused on the direct effect of IT use on innovation performance, while little is known about how IT use for different purposes in the innovation processes leads to innovation performance at the organizational level. Drawing on the routine-based absorptive capacity (AC) framework, we conceptualize IT use for knowledge search and relational search as IT-enabled internal and external AC routines and unveil the hierarchical benefits resulting from IT use for innovation. We propose a model in which firms need to purposefully use IT to search for knowledge in the new product development process or search for relationships in the collaborative innovation process, leading to first-order benefits (i.e., internal innovation benefits and open innovation benefits) and, in turn, second-order benefits (i.e., innovation performance). By using a unique data set from 1028 German firms between 2003 and 2007, we find that IT use for knowledge search enhances internal innovation benefits, whereas IT use for relational search increases open innovation benefits. More importantly, internal and open innovation benefits mediate the relationships between IT use for knowledge and relational search and various innovation performance measures. Taken together, our findings shed light on a deeper understanding of the digital innovation value chain.

Ambidexterity in External Knowledge Search Strategies and Innovation Performance: Mediating Role of Balanced Innovation and Moderating Role of Absorptive Capacity

The importance of external knowledge acquisition for innovation by firms is well established. In particular, there has been an increasing focus on the two distinct modes of firms’ external search strategies, which have a differential effect on their learning and innovation: search breadth and depth. By applying organizational ambidexterity lens, we hypothesize that pursuing high levels of both external search strategies is beneficial to achieve a balance between exploitative and explorative innovation, which, in turn, has a positive impact on the firm’s innovation performance. We also hypothesize that, even among the firms that maintain high levels of both search strategies, firms with higher absorptive capacity better achieve a balance between both modes of innovation, thereby producing higher performance. The findings on a multi-industry sample of Koran manufacturing firms confirm our hypotheses and imply that it is essential for firms to develop capabilities for different modes of external search activities in conjunction with internal absorptive capacity for superior innovation performance.

The significance of knowledge sharing platforms for open innovation success

PurposeThe purpose of this paper is to contribute to the theoretical background on how organizational change (OC) enhances open innovation (OI) processes and enables a company to reach performance results through implementing knowledge sharing platforms (KSPs). The authors aim to better understand and investigate how the changes introduced by the implementation of KSPs impact the OC and facilitate the OI process.Design/methodology/approachIn this paper, an exploratory longitudinal single case study based on a variety of data sources is used: participant observations, focus group discussions and semi-structured interviews with the KSP members and top managers of a Tunisian SME operating in the dairy products sector. The open-ended responses were subsequently exposed to thematic discourse analysis.FindingsThe case study findings deeply explore and investigate a company’s experience in implementing OCs when using a joint-venture alliance with a French leader to develop OI. Central to this exhibit is the nature and magnitude of the knowledge sharing between the parties in the OI process, and the significant impact it had on the consumers’ reception of the new products. The outcomes show that due to the sharing of external research and development skills, the creation of the KSP has been an incentive for significant changes and customer targeting and for promoting internal absorptive capacity, minimizing complexity, uncertainty and risks and reaching performance results.Originality/valueThis paper provides a deep understanding of the new product development process and offers a holistic approach with respect to KSP practices. The significant impact on the consumers’ first response and the subsequent adaption of an industrially produced cheese as a subsidiary product to an existing artisan quality product are examined in this study. Examining the implementation of an OI process, this research is one of the few studies revealing the shortcomings of a former process and a subsequent adaption of a newly successful one that targets the consumers in a MENA country.

Foreign tacit knowledge and a capabilities perspective on MNEs’ product innovativeness: Examining source-recipient knowledge absorption platforms

This study applies a capabilities perspective to examine how source-recipient knowledge absorption platforms affect the relationship between foreign tacit knowledge resource and multinational enterprises’ (MNEs) product innovativeness. Theoretically, this study moves beyond internal absorptive capacity into a capabilities perspective of MNEs’ product innovativeness. By using dynamic capabilities theory and absorptive capacity to frame source-recipient knowledge absorption platforms as dynamic capabilities, we build a model that enables the continued interaction between the tacit knowledge resource gained from foreign subsidiaries (source) and the focal (recipient) MNEs’ product innovativeness. For managerial implications, we focus on three organizational practices in terms of entrepreneurial competence, relationship harmony, and information communication technology (ICT) competence as potential enhancements to convert foreign tacit knowledge resource into MNEs’ product innovativeness.

How Domestic Firms Absorb Spillovers: A Routine-Based Model of Absorptive Capacity View

ABSTRACTExtant spillover literature explains domestic firms' productivity change mainly by the presence and attributes of foreign direct investment. In contrary, this paper, by adopting a routine-based model of absorptive capacity, intends to explore how domestic firms absorb spillovers over time. Based on a qualitative study of a domestic firm in China's silicone adhesive industry, the findings show that unbounded by geographical constraints, domestic firms enact their external absorptive capacity routines to actively search for spillovers from multinational enterprises (MNEs) at both national and international levels. Moreover, rather than searching for what is available, domestic firms are selective for spillovers that are coherent with their business strategies. The most unexpected finding is that domestic firms diligently acquire spillovers from MNEs and from local competitors in combination. Spillovers acquired from local competitors are used to increase the inferential accuracy of spillovers acquired from MNEs about strategic successes. Further, instead of absorbing spillovers from MNEs which pose moderate technology gaps, domestic firms target at MNEs which exhibit wider technology gaps, and undertake organizational learning and develop complementary assets to enhance their internal absorptive capacity routines. Socially enabling mechanisms are found to facilitate domestic firms' absorption of spillovers by employee turnover.

Firm’s strategic choices and network knowledge dynamics: how do they affect innovation?

PurposeThis paper aims to explain how the evolution of knowledge networks and firms’ strategic choices affect innovation. Endogenous factors associated with a path-dependent evolution of the knowledge network are jointly considered with a firm’s development of international relationships and increasing internal absorptive capacity over time.Design/methodology/approachIn a biotech cluster, the authors gathered data on the firms’ characteristics and network relationships by asking about the technological knowledge they received in the cluster in 2007 and 2012 – “roster-recall” method. Estimation results were obtained using moderated regression analysis.FindingsFirms that increase their involvement in knowledge networks over time also tend to increase their innovative capacity. However, efforts devoted to building international links or absorptive capacity negatively moderate the impact of network growth on innovation.Practical implicationsPractitioners have two alternative ways of increasing innovation inside knowledge networks: they can increase their centrality by developing their knowledge network interactions or invest in developing their internal absorptive capacity and new international sources of knowledge. Investing in both of these simultaneously does not seem to improve a firm’s innovative capacity.Originality/valueCoupling firms’ strategic options with knowledge network dynamics provide a more complete way of explaining how firms can improve their innovative capacity.

Assessing the Impact and Antecedents of University Scientific Research on Firms Innovation Commercialisation

University-firm links have stimulated a lot of attention. In fact, with the increasing knowledge and technologies created within university laboratories, firms have identified business opportunities by accessing the knowledge developed by external actors and commercialising universities' inventions. In this case, they adopt a knowledge acquisition strategy to foster innovation, reducing risk and exploiting new technological opportunities. This underlines a shift in the role of universities from education providers to scientific knowledge and technologies producers in the current knowledge-driven economy. In this context, the main goal of this paper is to assess the impact of knowledge acquisition on firms' innovation commercialisation, with a specific focus on knowledge developed by university scientific research. By applying hierarchical regressions on a sample of 185 Italian knowledge-intensive firms (KIFs), the findings indicate that firms benefit from research partnerships with and services from universities, when they also seek knowledge from other counterparts and when they possess higher levels of internal absorptive capacity.

Does open innovation apply to China? Exploring the contingent role of external knowledge sources and internal absorptive capacity in Chinese large firms and SMEs

AbstractWhile ‘open innovation’ is often considered to be an organisational strategy with universal application, its generalisability and applicability to organisations operating within emerging economies has yet to be fully explored. This study provides empirical evidence of its importance within a substantial sample of Chinese large firms and small and medium enterprises. Using Tobit regression analysis, our findings indicate that external knowledge sources from inter-firm networking are more important in creating the benefits of open innovation for Chinese small and medium enterprises than their larger peers. Linkages to university and research institutes generally have few direct effects on the innovation performance of both large and small firms in China. However, the role of universities and research institutes is shown to be important among our large firm sample when combined with evident internal absorptive capacity. This interaction is generally limited to our large firm sample, and is not as evident among small firms.Our study indicates that the barriers to the adoption of open innovation by Chinese firms might be largely related to the comparatively weak domestic research expertise and limited organisational absorptive capabilities, with this most particularly evident for small and medium enterprises.These findings suggest that, based on this evidence, there is no need for emerging economies like China to mimic the emergence path from closed to open innovation followed by developed countries. Chinese firms will be more likely to garner the benefits available from openness when they develop the capabilities required to identify, assimilate and commercialise knowledge and technologies obtained from external sources.

The Evolution of Absorptive Capacity Routines in Corporate R&D Subsidiaries

Abstract: The literature on absorptive capacity (AC) routines points out that a firm’s ability to innovate is influenced by the configuration of its internal and external AC routines. The normative outcome of this stream of research points towards a ‘balance’ between internal and external AC routines as the ideal configuration. However since AC routines enable organizational units to tap into specific sources of knowledge, we would expect the adoption and effectiveness of these AC routines to be influenced by what source of knowledge the unit needs in the first place. In this study we argue that the dominant logic of organizing R&D resources assigns mandates to investments that focus the attention of the managers on certain opportunities more than others. We propose that a unit’s mandate to pursue an exploitative or explorative innovation objective is a central pillar in our understanding of how the balance between internal and external AC routines is skewed either way. We test this ideas of interaction b...

Knowledge transfer between Russian and Western firms

PurposeThis paper seeks to challenge some assumptions that have long existed in the international business and knowledge management literature about knowledge transfer between Western and Russian firms. It aims to open a debate among scholars and practitioners in these fields on issues related to knowledge transfer in this context.Design/methodology/approachThe paper offers a critical analysis of issues regarding knowledge transfer and absorptive capacity in the context of business interactions between Russian and Western firms.FindingsThe paper argues that in the later stages of post‐Socialist transition it is no longer valid to attach rigidly the roles, respectively, of sole receiver to Russian and sole transmitter to Western firms. Further, the paper questions the view that problems in the knowledge transfer process are mainly attributable to the lack of absorptive capacity in Russian firms. As post‐Socialist transition has advanced, this is no longer the typical case. While Russian firms have taken the learning race seriously and have substantially enriched their knowledge stock, Western firms operating in the Russian market have primarily “learned by doing” and have not intentionally invested in improving their own absorptive capacity.Research limitations/implicationsThe paper invites scholars to examine knowledge transfer between Russian and Western firms in a more nuanced manner that takes into account the changes evident in the latest stage of post‐socialist transition. It advocates against subscribing to well‐established assumptions that were valid in the beginning of post‐Socialist transition, but are not aligned with changed economic realities.Practical implicationsWestern managers are advised to invest more effort into enhancing their understanding of the local knowledge and specific requirements and needs for knowledge transfer to local Russian firms. They should intentionally invest in enhancing their own internal absorptive capacity. Russian managers need to pay attention to the dynamics of the absorptive capacity‐learning feedback loop, as well as to the distinction between potential and realised absorptive capacity.Originality/valueUnlike the mainstream literature that has examined knowledge transfer between Western and Russian firms, this paper provides a fairer, more balanced view, aligned with changed realities, of the issues associated with knowledge transfer between Russian and Western firms.

Microfoundations of Internal and External Absorptive Capacity Routines

The 20 years following the introduction of the seminal construct of absorptive capacity (AC) by Cohen and Levinthal (Cohen, W. M., D. A. Levinthal. 1989. Innovation and learning: The two faces of R&D. Econom. J. 99(397) 569–596; Cohen, W. M., D. A. Levinthal. 1990. Absorptive capacity: A new perspective on learning and innovation. Admin. Sci. Quart. 35(1) 128–152) have seen the proliferation of a vast literature citing the AC construct in over 10,000 published papers, chapters, and books, and interpreting it or applying it in many areas of organization science research, including organization theory, strategic management, and economics. However, with very few exceptions, the specific organizational routines and processes that constitute AC capabilities remain a black box. In this paper, we propose a routine-based model of AC as a first step toward the operationalization of the AC construct. Our intent is to direct attention to the importance of balancing internal knowledge creating processes with the identification, acquisition, and assimilation of new knowledge originating in the external environment. We decompose the construct of AC into two components, internal and external AC capabilities, and identify the configuration of metaroutines underlying these two components. These higher-level routines are expressed within organizations by configurations of empirically observable practiced routines that are idiosyncratic and firm specific. Therefore, we conceptualize metaroutines as the foundations of practiced routines. The ability of organizations to discover and implement complementarities between AC routines may explain why some firms are successful early adopters and most firms are imitators. Success as an early adopter of a new management practice or an innovation is expected to depend on the extent to which an organization evolves, adapts, and implements the configuration of its internal and external absorptive capacity routines.