Absorptive Capacity and Its Dual Effect on Technological Innovation: A Structural Equations Model Approach

Abstract

Knowledge absorptive capacity (ACAP) is a key dynamic capability that boosts business innovation, particularly in developing economies. However, scarce studies focus on ACAP and technological innovation (TI) in the context of small- and medium-sized enterprises (SMEs). Therefore, this study aims to examine the effects of two different types of knowledge absorptive capacities to generate TI in the context of the Mexican manufacturing industry and determine whether realized absorptive capacity (RACAP) mediates the relationship between potential absorptive capacity (PACAP) and TI. This analysis was carried out through an empirical study of predictive type and quantitative approach. A survey-type questionnaire was randomly applied to a sample of 249 SMEs. The survey confers 200 managers’ opinions on the manufacturing industry in Mexico. The outcomes obtained through the variance-based structural equations (PLS-SEM) approach revealed that PACAP significantly influences RACAP, whereas, RACAP does impact TI and has a full mediating effect on the relationship between PACAP and TI. Nevertheless, although the significant direct effect of PACAP on TI is not verified, this research demonstrated the significant indirect effect of PACAP on TI. The findings reveal important implications for managers and decision-makers who must direct their strategies and ensure that the external knowledge acquired is assimilated by their employees so that PACAP will result in the transformation and exploitation of the internal and external knowledge acquired (RACAP), converting it into new products and processes.