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Absorptive Capacity: A Review, Reconceptualization, and Extension
Abstract
Researchers have used the absorptive capacity construct to explain various organizational phenomena. In this article we review the literature to identify key dimensions of absorptive capacity and offer a reconceptualization of this construct. Building upon the dynamic capabilities view of the firm, we distinguish between a firm's potential and realized capacity. We then advance a model outlining the conditions when the firm's potential and realized capacities can differentially influence the creation and sustenance of its competitive advantage.
... Previous research has suggested that innovation in SMEs is associated with financial performance and competitive advantage (Hassi et al., 2022;Shanker et al., 2017;Damanpour et al., 2009). Innovation is commonly posed as the process of developing new ideas, methods, products, or services that create value or improve existing solutions within companies (Zahra and George, 2002). A critical point for companies is often how they absorb innovative ideas, that is, the organization's ability to capture and transform innovative ideas into operational activities (Zou et al., 2018;James, 2014). ...
Introduction
Flexible Work Arrangements (FWA) have become increasingly prevalent, offering employees flexibility in time, tasks, and location. While extensively researched at the employee level, FWAs organizational impact, particularly on innovation, productivity, and perceived organizational attractiveness, is less explored, especially in small and medium-sized enterprises (SMEs). This study aims to explore how FWAs influence these key areas from the perspective of SME managers.
Method
A qualitative study used semi-structured interviews with 17 managers from SMEs in Sweden. Participants were selected based on diversity in industry, gender, and experience. Data were analyzed using thematic analysis to identify recurring themes regarding innovation, productivity, and company attractiveness in relation to FWA.
Results
The results revealed that while FWAs can enhance innovation by promoting employee autonomy and diverse work settings, they may also hinder long-term innovation by reducing spontaneous discussions and collaboration. FWAs may improve individual performance but pose challenges to productivity in coordinating teams and maintaining project timelines, necessitating increased managerial oversight. Additionally, while offering an FWA attracts employees, it may weaken employee loyalty.
Discussion/conclusion
These findings highlight the need for SMEs to carefully balance the benefits of FWAs with potential drawbacks, to maintain a competitive edge, suggesting the importance of structured management processes, regulated onsite workdays, and strategies to strengthen organizational connections. This balance is essential for sustaining innovation, productivity, and organizational cohesion. The findings also underscore the complexity of implementing FWAs in a way that supports long-term organizational success.
Purpose
Technological innovation and development have increasingly become crucial for the survival and growth of enterprises. Although the impact of innovation on performance and the relationship between technological development and performance have been investigated, the interrelationship between the three components has been neglected. The purpose of this paper is to investigate the moderating role of technological capability in product innovation and firm performance in the context of the Vietnamese economy.
Design/methodology/approach
By using the Generalized Method of Moments (GMM) regression and the xtpcse regression analysis method to address data errors in the time series model, this study uses panel data from 218 listed companies on the Vietnam stock market from 2015 to 2022.
Findings
The findings suggest that companies innovating their products can enhance firm performance. However, companies with high technological capability may have a negative impact on firm performance and moderate the impact of product innovation on firm performance. Specifically, technological capabilities weaken the effect of product innovation on firm performance. Further analysis by dividing the sample into two groups based on high and low Return on Assets reveals that the moderating variable TECHCAP holds similar significance.
Research limitations/implications
This study was conducted using data from companies listed on the Vietnam stock market, which may not be fully representative of all firms in the Vietnamese economy. The second limitation comes from differences in recording and disclosing financial information related to product innovation costs specified in Vietnamese Accounting Standards compared to other countries. This leads to some difficulties in collecting data, reporting results and making objective comparisons with studies around the world.
Practical implications
The findings of this research provide valuable insights for managers in formulating short-term and long-term business strategies. The results also serve as a reference for potential investors in making effective investment decisions.
Originality/value
This study contributes to the literature by highlighting the complex relationship between technological capability, product innovation and firm performance. It offers a novel understanding of how technological capabilities can moderate the benefits of product innovation, providing a nuanced perspective for both scholars and practitioners.
Purpose
Manufacturers face many challenges in continual innovation and strategical adaptation to environmental changes. Businesses must embrace evolved management theory while implementing a robust supply chain quality management (SCQM) strategy for a sustainable supply chain (SDG12). However, there is a dearth of awareness in applying knowledge-based dynamic capability (KBDC) in SCQM. Furthermore, knowledge sharing, an important component of KBDC, has received less attention when assessing organizational innovation and strategic business performance (SBP). Hence, our study aims to identify the impact of SCQM practices on knowledge sharing, organizational innovation and SBP by applying the KBDC theory.
Design/methodology/approach
We empirically tested 204 valid questionnaire responses received from Malaysian manufacturers using a deep partial least squares-structural equation modelling (PLS-SEM) analysis.
Findings
Our study reveals that SCQM practices have a significant direct impact on knowledge sharing, organizational innovation and SBP. Furthermore, our research indicates that knowledge sharing mediates (partially complementary mediation) the association between SCQM practices and organizational innovation but not SCQM practices and SBP.
Originality/value
Our study contributes to the KBDC theory by illustrating the significance of SCQM practices on knowledge sharing, organizational innovation and SBP. The study findings provide a greater understanding of the impact of SCQM practices on knowledge sharing, organizational innovation and SBP, thereby shedding light on the importance of practices related to human capital development and integration that manufacturers should consider when designing a SCQM system. The study shall assist the manufacturers in achieving a sustainable supply chain (SDG 12).
This paper explores the innovation ecosystem and performance of South Korean manufacturing firms during the digital transformation era, emphasizing differences between high-tech and conventional-tech firms. Using data from the 2022 Korea Innovation Survey, the analysis covers 4000 firms, including 1364 high-tech and 2636 conventional-tech firms. The study focused on two models: the innovation ecosystem model, which examined knowledge dissemination channels and innovation partnerships, and the product innovation performance model, which evaluated the effects of internal capabilities and government policies on innovation outcomes. The findings indicate that high-tech firms primarily utilize “slippery knowledge” channels, such as public domain and intellectual property rights (IPRs), and prefer external innovation partnerships with public research institutions, universities, and private companies. Conversely, conventional-tech firms rely more on “sticky knowledge” channels, such as collaboration & network and venture creation, and depend heavily on internal resources and affiliates. These results suggest that high-tech firms favor an open innovation approach, while conventional-tech firms focus on internal capabilities to protect their IPRs. Public research institutions play a critical role in South Korea’s ecosystem, unlike Western countries where universities are more central. Furthermore, government’s technology support policies were more effective for high-tech firms than direct financial support, highlighting the need for tailored innovation strategies across technology groups.
Organizational agility (OA), the ability of an organization to adapt to rapidly changing environments and reconfigure its structure and operations, has become a critical capability for achieving and sustaining competitive advantage. However, existing frameworks for OA often adopt narrow, industry-specific perspectives, neglecting the broader interplay of contextual factors, internal and external antecedents, and multidimensional capabilities. This study addresses this gap by conducting a systematic literature review (SLR) of 110 peer-reviewed articles from three leading academic databases. Guided by an inductive approach and the grounded theory methodology, this research identifies and categorizes the key antecedents of OA into four interconnected dimensions: contextual factors, fundamental attributes, vital enablers, and dynamic capabilities. The findings reconceptualize OA as a bundle of interrelated dynamic capabilities-encompassing macro-agility (e.g., strategic and partnering agility) and micro-agility (e.g., operational, innovation, and workforce agility)-rather than a singular construct. This multidimensional concept bridges theoretical gaps, integrating insights from contingency, agency and resource-based theories to explain the dynamic relationship between internal and external antecedents. The study offers a foundation for future research and provides actionable guidance for practitioners seeking to design agile organizations capable of thriving in dynamic capabilities.
Research Summary
We investigate why a corporate investor makes more corporate venture capital (CVC) investments in certain areas than in others. Focusing on firms' different technological capabilities across distinct technology domains, we argue that a corporate investor's technological capabilities in a given domain affect its likelihood of investing in (1) ventures within the domain in an inverted U‐shaped manner and (2) ventures operating in other technologically complementary domains in a positive manner. We further claim that these two suggested relationships between technological capabilities and the likelihood of CVC investments are shaped by the technology growth rate of the focal domain. We test these arguments in the US medical sector, where incumbent firms are active in CVC investments as a means to acquire external knowledge.
Managerial Summary
We argue that firms exhibit different patterns in their choice of CVC investment areas based on their technological capabilities within a given technology domain. Our findings in the US medical sector indicate that firms are most likely to invest in ventures within domains where their technological capabilities are moderate—neither too weak nor too strong. This suggests that CVC investments serve gap‐filling purposes for technology intermediates. Moreover, corporate investors tend to invest in ventures within domains that are technologically complementary to their areas of strength. However, when a given domain experiences rapid growth, technology leaders in that domain shift their CVC investment focus from complementary areas to that domain to maintain their leading position.
Purpose
A significant body of research has investigated open innovation and absorptive capacity as well as the relationship between them. Moreover, recent research has classified each concept into subcategories on the basis of theoretical reasoning. However, the relationships among these subcategories in terms of theoretical and empirical aspects are unknown. Thus, this study makes several hypotheses related to the generally accepted subcategories, i.e. academic and business collaboration and potential and realized absorptive capacity. We empirically tested data from a questionnaire survey and public data from Japanese industrial firms.
Design/methodology/approach
This study empirically analyzes the relationship between open innovation and absorptive capacity via a quantitative approach and a questionnaire survey.
Findings
The results show that the types of collaboration partners might affect certain subcategories of absorptive capacity related to firm performance. Specifically, academic collaboration enhances potential absorptive capacity but diminishes realized absorptive capacity. Business collaboration has a positive effect on firm performance but limited effects on both potential and realized absorptive capacity.
Originality/value
This study considers the advancements of previous studies to study the relationship between open innovation and absorptive capacity. This study elucidates the efficacy and limitations of these concepts and advances our knowledge of innovation research areas.
"Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street," observed legendary speculator Jesse Livermore. History tells us that periods of major technological innovation are typically accompanied by speculative bubbles as economic agents overreact to genuine advancements in productivity. Excessive run-ups in asset prices can have important consequences for the economy as firms and investors respond to the price signals, resulting in capital misallocation. On the one hand, speculation can magnify the volatility of economic and financial variables, thus harming the welfare of those who are averse to uncertainty and fluctuations. But on the other hand, speculation can increase investment in risky ventures, thus yielding benefits to a society that suffers from an underinvestment problem.
Strategic renewal consists of three subprocesses (competence definition deployment, and modification). Within each subprocess. the roles of top-, middle- and operating-level managers differ in their time horizon, information requirements, and core values. Dissensus in managers' perceptions about the need for change creates strategic role conflicts within individual managers and between managerial roles. In this article we explain when and where strategic role conflict occurs and how organizational controls may be used to alleviate it.
Although the field of entrepreneurship originated in the study of those individuals who created new ventures, it has expanded to embrace entrepreneurship as a firm‐level phenomenon. Building on the basic notion of entrepreneurship as “the identification of market opportunity and the creation of combinations of resources to pursue it”, a firm‐level perspective focuses on those organizational characteristics and behaviors aimed at innovation and strategic renewal. The need for such study lies in findings that demonstrate that corporate entrepreneurship has significant consequences for firm survival, performance, and growth. However, these consequences of corporate entrepreneurship are usually seen in intermediate to longer‐term results.
Creative and habitual actions represent competing behavioral options that may be simultaneously influenced by multiple domains of social action. This article integrates psychological and sociological descriptions of creativity and conformity to present a theory of individual creative action within organizational settings composed of intertwined group, organizational, institutional, and market domains. This theory contributes to the innovation literature by illustrating how intentional action and evolutionary processes that legitimize action interact to facilitate creativity and innovation.
An increasing number of new venture firms are internationalizing their business operations early in their life cycles. Previous explanations of this trend have focused on the importance of technological knowledge, skills, and resources for new ventures' international expansion. However, little is known about how these firms use the technological learning gained through internationalization. This study examined the effects of international expansion, as measured by international diversity and mode of market entry, on a firm's technological learning and the effects of this learning on the firm's financial performance.
This article bridges the literatures on competitor analysis and strategic decision making by (1) introducing the notion of competitive decision making into the strategic decision-making literature and (2) embedding this notion into a framework of industry and competitor analysis. The article shows that decision makers typically have specific "blind spots" when they consider the contingent decisions of competitors. The article identifies these blind spots and discusses how they may explain persistent, commonly observed phenomena such as industry overcapacity, new business entry failures, and acquisition premiums.
In this article we argue that the extant representations of the concept of organizational memory are fragmented and underdeveloped. In developing a more coherent theory, we address possible concerns about anthropomorphism; define organizational memory and elaborate on its structure; and discuss the processes of information acquisition, retention, and retrieval. Next, these processes undergird a discussion of how organizational memory can be used, misused, or abused in the management of organizations. Some existing theories are reassessed with explicit attention to memory. The paper closes with an examination of the methodological challenges that await future researchers in this area.