The effects of Information Technology on absorptive capacity and organisational performance

Information Technology (IT) offers many opportunities for firms to succeed. The aim of this paper is to present a model to reflect how technical IT skills and the use of IT in interdependent tasks may influence the development of organisational absorptive capacity, both potential and realised, which also affects organisational performance. Since knowledge constitutes one of the main resources for organisations to gain competitive advantages and helps firms to improve their organisational performance, absorptive capacity is a key factor in success. This model was tested empirically using a sample of 160 European technological firms. The results of our analysis suggest that the mastery of technical IT skills and the use of IT in interdependent tasks positively affect potential and realised absorptive capacities, which in turn enhances organisational performance. The study concludes by presenting some theoretical and practical implications, limitations, and future research lines.     

Beyond absorptive capacity in open innovation process: the relationships between openness,capacities and firm performance

The literature has shown that open innovation (OI) can be a winning strategy in improving firm performance. However, in order to adopt and implement it, managers need to resolve practical problems, such as understanding the role played by OI capacities and openness on firm performance. In response to these needs, this study aims to investigate the hierarchical relationships between openness, OI capacities and performance using a structural equation model approach. This paper also attempts to compare the levels of openness between firms in different industries to discover similarities and differences in OI phenomena. The analysis of data obtained from a survey of Korean firms shows significant interrelations between openness, OI capacities and firm performance. Our results go further in developing understanding of the building blocks on which successful OI is built and particularly suggest that desorptive capacity which underpins the out-bound OI process, is in turn strongly supported by knowledge management capacity. It is hoped that the results of this study can enrich our understanding of the OI mechanism and provide managerial and policy implications.     

Absorptive capacity and firm performance: an integrative framework of benefits and downsides

Research underscores the important role a firm's absorptive capacity plays in developing knowledge, promoting open innovation, managing alliances, facilitating organisational learning, creating strategic variety, and enhancing financial performance. However, prior research often overlooks how absorptive capacity could increase a firm's costs associated with building this capacity, perpetuate and even increase inertia because of reduced variety and limited organisational search, handicap internal knowledge development, and complicate knowledge sharing. Research also ignores the growing complexity of absorptive capacity, a factor that could reduce a firm's gains from exploiting external knowledge. Our discussion builds on the knowledge-based view to provide an integrative framework for the performance effects of absorptive capacity. Based on different benefits and downsides of absorptive capacity at multiple levels of analysis, it points to an inverted U-shaped relationship between absorptive capacity and a firm's financial performance, highlighting several promising avenues for future research.     

Financial markets and firm size: The role of employment protection laws and barriers to entrepreneurship

This article provides evidence on the institutional determinants of firm size for the period 1980–1998. Using a comprehensive longitudinal database across 29 industrial sectors in 15 Organisation for Economic Co-operation and Development (OECD) countries, we study how labour regulations and barriers to entrepreneurship (BE) affect industrial organization in the presence of capital market frictions. We show that strict employment protection laws (EPL) and high BE negatively affect firm size in sectors that are more dependent on external funds. Our findings demonstrate that the interaction between market regulations and financial market imperfections help to explain some of the differences in firm structure across countries.     

Information technology investment and firm performance in US retail trade

We examine the relationship between investments in information technology (IT) and retail firm performance. We use untapped firm and establishment micro data from the Censuses of Retail Trade and the Assets and Expenditures Survey. We show that large firms account for most retail IT investment, employment, and establishment growth. We find evidence of a significant relationship between IT investment intensity and productivity growth.     

An exploratory analysis of the relationship between absorptive capacity and business strategy

In this study, we argue that a firm's absorptive capacity will vary depending on the strategy it adopts. To examine this, based on the fact that absorptive capacity is developed through the ability to acquire, assimilate, transform and exploit externally-generated knowledge, we look at the importance of each of these dimensions at firms pursuing different business strategies. To reflect business strategy, we draw on Miles and Snow's typology. The information has been obtained based on a sample made up of 81 Spanish small and medium-sized enterprises. Results show that knowledge acquisition capacity is greater at prospectors than at defenders and analysers, and that transformation and exploitation capacities are greater at prospectors than at defenders. No differences in knowledge assimilation capacity are observed.     

Linking technology innovation strategy,intellectual capital and technology innovation performance in manufacturing SMEs

The research interest on Intellectual Capital (IC) has been increasing, adopting different definitions and developing diverse measurement tools. Nonetheless, little research focuses on small and medium-sized enterprises (SMEs) and the relation between IC and innovation management. The purpose of this paper is to investigate the role of technology innovation strategy on the IC development and then on innovation performance in manufacturing SMEs. After conducting a survey, measures of IC for SMEs have been performed and an integrated structural equation model has been created. Results demonstrate that technology innovation strategy affects all IC components, the internal structural capital supports the relational and human capital, and the latter two influence firm technology innovation performance. This study contributes to developing an IC measurement system in SMEs and to emphasise the importance of single IC components in improving technology innovation performance.     

University research alliances,absorptive capacity,and the contribution of startups to employment growth

This paper examines how university research alliances and other cooperative links with universities contribute to startup employment growth. We argue that ‘scientific absorptive capacity’ at the startup is critical for reaping the benefits from university research alliances, but not necessarily for other university connections. We also estimate the aggregate employment contribution from startup firms and attribute those employment gains to university research alliances and other university connections. We find significant contributions to employment growth from university research alliances and other university connections, but scientific absorptive capacity is critical for university research alliances. Only 7% of the startup population maintained a university research alliance, but among these firms, 3.4% of their total jobs created were attributable to their alliances. These results suggest that university connections are quite important for job growth and university research alliances contributed substantially to job creation for those firms that had such alliances.     

Ownership transformation,firm performance and manufacturing growth in China

Many commentators and researchers have attributed the manufacturing success in China to its ownership reforms. Using a micro database from the Chinese National Bureau of Statistics, this paper documents and quantifies this development. With systematic and robust analyses, it shows that the development of private ownership indeed played an essential role in improving firm performance and the allocation and utilization of production resources in the Chinese manufacturing sector. In addition, the paper estimates the contributions of firms under different ownership to manufacturing growth, showing that the development of private ownership was the driving force of manufacturing growth in China. The strong credible evidence has important policy implications for further maintaining sustainable development in China.     

The performance effect of two different dimensions of absorptive capacity and moderating role of holding-cash

This study identified two different dimensions of absorptive capacity and examined the relationship between absorptive capacity and a firm’s financial performance. Further, we measured absorptive capacity using both the inputs and outputs involved in its development simultaneously, and investigated the complementary role of holding-cash in the performance effect of two dimensions of absorptive capacity. Our results showed that a firm’s homogeneous absorptive capacity has a positive effect on its short-term performance, while a firm’s heterogeneous absorptive capacity may hinder its short-term business performance. However, a high level of either homogeneous or heterogeneous absorptive capacity is not always useful to a firm’s long-term financial performance. Finally, cash, as a slack resource, was found to be more useful for the performance effect of heterogeneous absorptive capacity than for that of homogeneous absorptive capacity in the short term.     

The role of corporate governance strength in crisis and non-crisis times

This study evaluates corporate governance practices of listed firms in the United Arab Emirates and investigates whether corporate governance mitigates/exacerbates the impact of leverage and risk on firm performance during crisis and non-crisis times. The study constructs a corporate governance index not only to examine the dispute of the role of corporate governance during the crisis but also its influence on other factors that fuelled the crisis. A firm-level panel data is used that spans the period 2008–2012 of all listed firms on Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM). The study finds a positive influence of corporate governance strength on the accounting performance, but a negative influence on the firms’ economic performance. In normal times, corporate governance mitigates the negative influence of leverage and risk on the accounting and economic firm performance. However, this synergy effect varies across performance indicators during crisis.     

Productivity spillovers through backward linkages: The role of the origin of investors and absorptive capacity of domestic firms

We argue that multinationals from different home countries have different technologies and input sourcing behavior. These differences impinge on potential productivity spillovers through backward linkages of multinationals and such effects also differ across host local firms depending on their absorptive capacity. Using a panel of Cameroonian manufacturing firms over the period 1993 to 2005, we find supportive evidence of these arguments. There is a negative relationship between the presence of American and European affiliates in downstream sectors and the productivity of Cameroonian firms in the supplying industries and a positive correlation in the case of Asian affiliates. The absorptive capacity of Cameroonian firms mainly explains these divergent results.     

Which skills contribute most to absorptive capacity,innovation and productivity performance? Evidence from the US and Western Europe

ABSTRACT

Skills are widely recognised as central to absorptive capacity, that is, firms’ ability to identify and make effective use of knowledge, ideas and technologies that are generated elsewhere. But identification of the specific levels of education and skills that contribute most to the development of absorptive capacity is often hampered by the use of skill measures as proxies for absorptive capacity itself. Drawing on a cross-country industry-level dataset, we retain separate measures of key components of absorptive capacity, namely, skills, R&D investments and openness to foreign trade and investment. We then estimate a system of structural equations in order to evaluate the extent to which different levels of skill contribute to innovative output (measured by growth in patenting) and subsequently to growth in productivity. We find important roles for both high-level skills and upper intermediate (technician-level) skills in converting the knowledge sourcing opportunities provided by openness into innovative output. In final stages of production (making use of innovative output), productivity growth in countries near to the technological frontier is enhanced not just by high-level and upper intermediate skills but also by the skills of the workforce as a whole.     

Board diversity and firm performance: evidence from the U.K. SMEs

This study examines the relationship between board diversity and firm performance in small- and medium-sized enterprises (SMEs) in the U.K. In particular, we investigate the role of gender and age as two dimensions of diversity. Using a large sample of SMEs (34,798 firms) located in the U.K. and focusing on the period from 2005 to 2013, our results show a significant negative association between each of gender diversity and age diversity, and firm performance. Our evidence yields important insights on the association between board diversity and firm performance, and calls suggestions for increased board diversity into question. A possible explanation for our findings could be due to the fact that our sampled firms are SMEs, whereas those in previous studies have been large enterprises. This research provides insights to entrepreneurs on how to enhance their performance, and to governments and policymakers on the development of rules that would achieve better performance in the SME sector.     

Innovation in foreign enterprises: the influence exerted by location and absorptive capacity

ABSTRACT

This paper has as its aim to analyse multinational enterprises’ location decisions from the perspective of the knowledge-based firm in an attempt to answer the following questions: Are innovative MNEs more likely to be located in areas with a higher degree of agglomeration? Who benefits to a greater extent ? in terms of innovation ? from geographical proximity with other agents: national or foreign enterprises? What role does absorptive capacity play in the relationship between agglomeration and innovation? According to this research work, agglomeration differently influences the innovation of MNE subsidiaries – through knowledge spillovers – depending on the types of agglomerated companies. The analysis performed with a sample of firms located in Spain includes local and foreign companies and uses data from a survey conducted by the National Statistics Institute (INE for its Spanish initials) in 2016. The results show that the agglomeration of similar enterprises favours innovation amongst foreign firms, as opposed to local ones, which absorb both positive and negative effects.     

Ownership dynamics and firm performance in an emerging economy: a meta-analysis of the Russian literature

This paper provides a meta-analysis of studies on the effect of ownership on the performance of Russian firms over 20 years of rapid institutional and economic changes. We review 29 studies extracted from the EconLit and Web of Science databases with a total of 877 relevant estimates. We find that the government negatively affects company performance regardless of its administrative level. In contrast, private ownership is positively associated with firm performance. However, the effect size and statistical significance are notably varied among different types of private ownership. While the effect of insider (employee and management) ownership is comparable to that of foreign investors, the effect of domestic outsider investors is considerably smaller. Our assessment of publication selection bias reveals that the existing literature does not contain genuine evidence for a series of ownership types and, therefore, some of the findings have certain limitations.     

Founders’ human capital and external knowledge sourcing: Exploring the absorptive capacity of start-up firms

ABSTRACT

This study highlights the importance of founders’ human capital on firms’ absorptive capacity for explaining the external knowledge sourcing (licensing-in and joint R&D) of start-up firms, using panel data from original questionnaire surveys conducted in Japan. The results of a probit model with an endogenous regressor show that firms managed by founders with a high level of specific human capital, measured as prior innovation experience and industry-specific work experience, tend to engage in external knowledge sourcing because of their superior absorptive capacity. The findings indicate that this type of human capital also promotes research and development (R&D) investment. Contrariwise, this study finds that firms managed by founders with a high level of general human capital, measured as educational attainment, tend to invest more in R&D, which enhances their absorptive capacity and thereby promotes external knowledge sourcing. Finally, the implications of these findings are discussed from the perspective of public policy.     

Catching up of emerging economies: the role of capital goods imports,FDI inflows,domestic investment and absorptive capacity

We show that the impact of capital goods imports and FDI inflows on economic convergence depends on the local capacity of emerging economies to absorb superior technologies.     

Transformational leadership and absorptive capacity: an analysis of the organisational catalysts for this relationship

Research analysing the antecedents of a firm’s absorptive capacity suggests that transformational leadership (TL) is one of its main determinants. However, the few studies focusing on the relationship between these two variables do not explicitly assess why transformational leaders facilitate knowledge acquisition, sharing and retention inside firms. This paper suggests that the reason is that the former contributes to the creation of an organisational context that favours learning processes. We test our research model on a sample of 467 Spanish industrial firms. Findings provide evidence that TL is positively related to the firm’s absorptive capacity and that this relationship is mediated by some organisational learning facilitators: experimentation, risk-taking, interacting with external environment and dialogue.     

Spillovers and absorptive capacity in the decision to innovate of Spanish firms: the role of human capital

This paper investigates whether the existence of knowledge spillovers and the capacity of firms to assimilate them, which we relate with R&D intensity and some human resource management practices, are associated with the decision to innovate of Spanish firms. In order to do this, we employ data from the ‘Central de Balances’ database, which covers both manufacturing and services firms during the period 2003–2007, and use an estimator proposed by Wooldridge [2005. Simple solutions to the initial conditions problem in dynamic nonlinear panel data models with unobserved heterogeneity. Journal of Applied Econometrics 20, no. 1: 39–54] for dynamic random effects discrete choice models. The empirical exercise provides evidence on the positive link between spillovers and the innovative behaviour of companies, not just for the knowledge generated in the same industry, but also for that generated in the same region or by the public sector. Moreover, this link is stronger for those firms with a higher capacity to absorb those spillovers. This ability not only works through firms’ R&D capabilities, but also through factors such as the quality of the labour force, the share of temporary employment and the amount of resources spent in training. In addition to these factors, we find that innovation performance exhibits a high degree of inertia. Further, some other observed firm characteristics, such as size, sales growth, export behaviour, sector capital intensity or financial structure variables, are also found to be relevant determinants of the likelihood of innovation.