Moderators and Absorptive Capacity as a Moderator

In recent years, studies have emerged examining moderators of how absorptive capacity relates to its outcomes, as well as the moderating effect of absorptive capacity on how organizational characteristics impact innovation and performance. In particular, studies have shown that the effect of absorptive capacity on innovation and performance is dependent on the environment in which firms operate (Lane et al., 2006; Lim, 2009). Van den Bosch et al. (1999) found that in a stable environment firms draw more exploitative innovations from their absorptive capacity since they are more likely to build on existing knowledge and increase the efficiency of knowledge absorption. In turbulent environments scope and flexibility of absorptive capacity are more important as they allow a firm to combine diverse knowledge and pursue exploratory innovations. Moreover, firms are more likely to decentralize their interface with the external environment to units, which increases the diversity of knowledge a firm can tap into and renders cross-functional relations more important (Cohen and Levinthal, 1990; Jones and Craven, 2001). Lichtenthaler (2009) distinguishes between technological and market turbulence has not found a moderating effect on the relation between the distinct dimensions of absorptive capacity and innovation. In contrast, his findings suggest that the effect of absorptive capacity on performance increases as market turbulence and, to a lesser degree, technological turbulence increase.

Following Cohen and Levinthal’s (1990) argument, appropriability regimes faced by firms and other aspects influencing appropriability have been forwarded as moderating factors (Hurmelinna-Laukkanen and Blomqvist, 2007; Lane et al., 2006). Zahra and George (2002) argue that under a strong regime of appropriability realized absorptive capacity is likely to have a stronger effect on sustainable competitive advantage than in low appropriability regimes, because rivals will face higher costs imitating knowledge and internalizing knowledge spillovers. Unless they face no danger of exogenous spillovers or form a research joint venture, competing firms choose distinct research approaches to offset spillovers and to limit diffusion of knowledge to other firms (Kamien and Zang, 2000), especially when absorptive capacity effects are weak (Grünfeld, 2003). However, competing firms tend to adopt similar research and development approaches if the probability grows that their connectedness increases, which subsequently reduces appropriability concerns (Lim, 2009; Wiethaus, 2005). Another issue influencing the appropriability of knowledge is whether knowledge is tacit or not. Bierly et al. (2009) show that the more knowledge is tacit the more the effect of technological competence and prior experience on exploratory and exploitative innovation increases. Similarly, based on two case studies, Van den Bosch et al. (1999) illustrate that systems capabilities enable the combination of explicit knowledge across organizational units, while coordination and socialization capabilities enable the externalization of tacit knowledge.

Recently, studies have shown that absorptive capacity acts as a moderator itself. For example, Escribano et al. (2009) and Tsai (2009) have assessed absorptive capacity as a moderator of how knowledge flow between partners influences innovative performance. Similarly, Rothaermel and Alexandre (2009) found that absorptive capacity not only permits a firm to pursue ambidexterity in technology sourcing, but also enables it to capture more innovation and performance benefits resulting from that ambidexterity. Similarly, social network studies show and imply that the effect of social capital on innovativeness is moderated by absorptive capacity. Firms may have a substantial or strong social network from which they derive social capital, they also need a prior knowledge base if they seek to learn from the actors in their network (Reagans and McEvily, 2003; Tsai, 2009). Moreover, a social network not only provides firms with the opportunity to access outside knowledge, but also aids in acting on that knowledge (Obstfeld, 2005). Indeed, Kotabe et al. (2010) found that the ability to transform and exploit knowledge (realized absorptive capacity) increases the effect of knowledge acquisition through ties on new product performance. However, since research grows showing how positions in a social network are antecedent to absorptive capacity, it calls into question whether absorptive capacity is driven by social networks or whether it is a condition determining the efficacy with which firms deploy their social networks to innovate and become competitive.