Absorptive capacity: towards individual or organizational themes

Capacidade absortiva: rumo a temas individuais ou organizacionais

Alessandra Yula Tutida sachatutida@hotmail.com

Universidade do Vale do Itajaí, Brazil

Carlos Ricardo Rossetto rossetto@univali.br

Universidade do Vale do Itajaí, Brazil

Ruan Carlos dos Santos ruan_santos1984@hotmail.com

Universidade do Estado de Santa Catarina, Brazil

In turbulent times where the business environment suffers intense competition, Small and Medium Enterprises (SME’s), in order to remain in the market and expand their competitive potential, are forced to innovate. For that, several processes are implemented, among them, the knowledge absorption process. The absorptive capacity (ACAP) is the capacity of a company to recognize the value of external knowledge, assimilate it, transform it and apply it to produce an organizational capacity (Cohen & Levinthal, 1990). As it is considered an organizational-level capacity, which consists of processes and routines (Zahra & George, 2002), absorptive capacity is relevant for formulating organizational strategies to enable renewing capacities and, therefore, to collaborate so that the companies adapt to external trends (Cappellari, Welter, Hermes, & Sausen, 2019).

Within the absorptive capacity studies, there were contradictions about the assumptions that form the basis of the construct. The microfoundation lens came to help detail the absorptive capacity to construct (Volberda, Foss, & Lyles, 2010), thus increasing understanding of how individuals’ actions, interactions, and organizational mechanisms shape the absorptive capacities of SMEs. ACAP studies have been increasingly interested in how SMEs develop ACAP due to its specificities and importance for the global economy (Jimenez, Angelov, & Rao, 2012). Regardless of the country in which they are located, SMEs face problems related to their survival or obtaining a competitive advantage (Khalique, Isa, Shaari, & Ageel, 2011).

Micro-foundations are the individual and organizational factors that determine the creation of routines and capabilities at the organization level (Felin, Foss, Heimeriks, & Madsen, 2012). In response to this, research has begun to advance in understanding absorptive capacity from an individual-level perspective (Lowik, Kraaijenbrink & Groen, 2012). Elg, Ghauri, Child, & Collinson (2017) stated that a set of micro-foundations improves the company’s ability to perceive and adapt to local differences and supports a variety of routines that help deal with the challenges of different organizational contexts (Balle, Oliveira, & Curado, 2020).

Briel, Schneider, and Lowry (2019) argue that because the dimensions of the knowledge absorption process require the exchange of information with partners, social integration mechanisms (MIS) influence the effectiveness of this process. Although social integration is a multidimensional construct (Knight & Eisenkraft, 2015), most research on absorptive capacity has treated social integration mainly as a “black box,” without clarifying the MIS influence the absorptive capacity of knowledge at the individual and organizational level.

Hart, Gilstrap and Bolino (2016), Martinkenaite and Breunig (2016), and Schweisfurth and Raasch (2018) propose that research be conducted using a micro-foundations approach to discover the influence of actions and agency of individuals on absorptive capacity (ACAP). Empirically, the role of social integration mechanisms in ACAP has been investigated by few studies (Cuervo-Cazurra & Rui, 2017; Yao & Chang, 2017; Vega-Jurado & Schmutzler, 2017; Enkel, Heil, Hengstler, & Wirth, 2017), but not enough for an understanding of whether these mechanisms can influence ACAP. Antecedents, as prior knowledge and experiences and social networks, the effects of these antecedents need to be further examined empirically (Zhao & Anand, 2009). Although individual absorptive capacity (ACAP) is mentioned in the literature as an essential element for organizational absorptive capacity, few studies have investigated this influence. Volberda, Foss and Lyles (2010) came to the conclusion that the individual level precedes the organizational level in the knowledge absorption process and this relationship is neglected in the literature.

Based on the above arguments, this article aims to evaluate the relationship between Individual Absorption Capacity, Social Integration Mechanisms, and Organizational Absorption Capacity in Small and Medium Enterprises. Thus, examining the micro-foundations of absorptive capacity could undoubtedly provide new insights into the relationships in small and medium-sized companies between Individual Absorptive Capacity, Social Integration Mechanisms, and Organizational Absorptive Capacity.

The methodological procedures used quantitative research and the survey technique to achieve the research objective. The survey was conducted in four companies in the metalworking sector in the state of Santa Catarina. In these companies, the objective was to research the perception of professionals, with some degree of decision-making, in the following sectors: i) marketing; ii) sales and services; iii) operations; iv) project management; v) engineering; vi) production; vii) finances; and; viii) human resources.

The sample resulted in 417 questionnaires. According to the G*Power 3.1.9.4 software, considering the complexity of the model, median f2 = 0.15 and Power = 0.80, the minimum sample should be 68 companies. Therefore, the sample is statistically adequate for conducting the research. Tang, Kacmar and Busenitz (2012) validated that the instrument collected data on individual absorptive capacity (individual ACAP). Researchers such as (Lowik, 2013; Samo & Hashim, 2016) used the same questionnaire in their studies. The instrument consists of 15 statements coded for data analysis as Q1|-|Q15. For data collection on social integration mechanisms, this research used the instrument validated by Jansen, Bosch and Volberta (2005), which was similarly applied by (Mom, Bosch, & Volberda, 2009; Engelen, Kube, Schmidt, & Flatten, 2014). The instrument has 27 assertions that were coded as Q16 |-|Q42.

For data collection on organizational absorptive capacity (organizational ACAP), the instrument validated by Flatten, Engele, Zahra and Brettel (2011) was used. Lau and Lo (2015) and Ali and Park (2016) also used this instrument. The instrument has 14 assertions coded as Q43 |-|Q56. All instruments had a 7-point Likert scale, where 1 represented totally disagree, and 7 totally agree.

Data were collected on-site in November 2019. Data analysis was performed considering: i) Cronbach’s alpha; ii) Composite Reliability; iii) Average Variance Extracted (AVE); iv) Fornell and Larcker criteria; v) Assessment of Pearson Coefficients of Determination (R2); vi) Effect size (f2) or Cohen’s Indicator; vii) Predictive Validity (Q2); and viii) Student’s t-test. Then, the estimation of the structural model (path coefficients) using the Partial Least Squares method via SmartPLS software version 3.2.8.

In recent decades, organizations have been on a path to develop a successful relationship with the mechanisms between individual and associated issues with organizations, so one of the essential pillars of this relationship is organizational sustainability, which aims to preserve the social, cultural, economic, and environmental components in which the organization operates (Stock, Greis, & Fischer, 2001; Sun & Anderson, 2010).

H1: The Individual Absorption Capacity positively impacts the Organizational Absorption Capacity - supported

Cohen and Levinthal (1990, p. 131) argue that ‘the absorptive capacity of an organization will depend on its individual members’ absorptive capacities. Subsequently, other researchers have recognized the importance of individuals at different stages of organizational knowledge absorption. The absorption of organizational knowledge is conceptualized as a result of the organization’s characteristics or its environment, where it is generated by the ability of individuals to absorb knowledge (Rothaermel & Alexandre, 2009; Y. Zhang, Li, Li, & Zhou, 2010).

Schulze, Brojerdi, and Krogh (2014) state that common knowledge among organizational members is relevant for absorbing organizational knowledge. It allows them to understand each other’s knowledge needs, coordinate their knowledge transfer activities, and build organizational absorptive capacity. The support for hypothesis 1 aligns with the perspective of micro-foundations because it assumes that the absorptive capacity is associated with the knowledge and cognitions of individuals. In day-to-day operations, the companies studied to demonstrate that the construction of organizational absorptive capacity is developed through the knowledge acquired by their employees. Ter Wal, Criscuolo and Salter (2017) states that individuals go through the process of searching and identifying valuable knowledge and engaging in greater assimilation and exploration of new knowledge in their companies(Tu, Vonderembse, Ragu-Nathan, & Sharkey, 2006).

This research provides meaningful information about the development of organizational absorptive capacity. It proves to be an aggregated phenomenon at the organizational level, proving that individuals collaborate throughout the ACAP process, as also verified by Distel (2019). By validating the hypothesis, it can be stated that, in the surveyed companies, organizational ACAP is based on the individual’s ability to identify valuable knowledge in the environment. Employee motivation and commitment are both necessary for the successful absorption of organizational knowledge. Previous research has shown that autonomy is positively related to an individual’s intrinsic motivation to engage in knowledge transfer, which increases organizational ACAP (Foss et al., 2009). In addition, individuals’ prior knowledge and experience and the underlying educational level of employees appear to help ACAP and speed of learning (Park & Harris, 2014). Looking at the sample of employees surveyed, we find that 42% of them have at least higher education, which confirms the authors’ statement.

Finally, thinking of the assimilation dimension, current research indicates that individuals who take on a guardian role that combine external research with assimilation efforts help achieve innovation by building a potential ACAP. Gatekeepers help create a pool of external knowledge that generates the potential for internal use through engagement in assimilation activities (Ter Wal et al., 2017).

Before discussing hypotheses 2 and 3, it is imperative to point out that organizational and individual capacity depends very strongly on interactions between individuals and groups within the organization. Consequently, we affirm that to develop the absorption of organizational and individual knowledge, according to the findings of this research, organizational mechanisms that create a positive environment for individuals are required. These organizational mechanisms can be called social integration mechanisms. They promote knowledge absorption by bringing people together and promoting the connection and shared meanings among the employees of an organization throughout the entire knowledge absorption process.

H2 - Social Integration Mechanisms influence the Organizational Absorption Capacity. – Supported

Micro-foundations lenses can give new directions in understanding how individuals’ actions, interactions, and participation in the organizational process, together with organizational mechanisms, shape the SME’s ACAP. The proof of hypotheses 2 and 3 gives us these insights. Jansen, Bosch and Volberda (2005) state that the more significant this participation, the greater the ability and motivation of these individuals to acquire and assimilate external knowledge so that organizational ACAP can be implemented.

In line with the authors above, intra-organizational social integration mechanisms, such as job rotation, participation in decision-making, team meetings, and short-term visits, can reduce barriers to knowledge absorption among employees and, thus, positively influence the absorptive capacity of an organization. The research confirmed what the authors claim when they found that social integration mechanisms, some mentioned by them, impact individual and organizational ACAP. The importance of internal relationships for the absorption of external knowledge is also discussed by Ebers and Maurer (2014). They state that organizational mechanisms, such as internal relationships, trust in the relationship between individuals, improve communication and exchange of information, causing organizational absorptive capacity to occur effectively.

Peltokorpi (2017) and Kim and Wemmerl (2015) reinforced that intra-organizational social integration mechanisms positively influence the organizational absorption capacity. Hutabarat & Pandin (2014) highlighted the company’s internal mechanism; Peltokorpi (2017) reinforces the findings when he states that interpersonal networks help the transfer of knowledge between sectors. Informal meetings and open dialogues between employees and managers can be other social integration mechanisms (Kianto & Andreeva, 2014). Previously, Todorova and Durisin (2007) already argued that social integration mechanisms could have a direct or moderating effect on the dimensions of the ACAP. Therefore, the literature reinforces the result achieved when testing hypothesis 2, suggesting that social integration mechanisms are essential for organizations to develop ACAP.

H3: Social Integration Mechanisms influence the individual’s Absorption Capacity. – Supported.

In order to justify the validation of hypothesis 3, it is crucial to recognize that the organizational context has the function of enhancing the individual absorption capacity. This function means that individuals interact within the organizational context in order to assimilate and apply knowledge. In this direction of thought, social integration defines shared reference maps between individuals, thus enabling an effective exchange of knowledge (Zhang, Zhao, Lyles, & Guo, 2015)

In this sense, it is observed that social integration mechanisms in this research (task rotation, connectivity, task rotation, among others) impact the individual absorptive capacity. As stated by Peltokorpi (2017), training is a social integration mechanism that promotes social integration. Training establishes shared codes and vocabularies that allow individuals and groups to understand knowledge, thus promoting knowledge exchange and pooling (Collins & Smith, 2006). Shared representations of tasks, equipment, work relationships, and situations among group members contribute to team cognition (Mohammed & Dumville, 2001).

Vegt (2002) and Vegt, Bunderson and Kuipers (2010) state that social integration is reflected in elements such as group cohesion and attraction of members to the group, leading to better absorption of individual individuals knowledge. For example, social gatherings are social integration mechanisms that promote affective, social integration between individuals. Social meetings encourage individuals to share their experiences (Liu, Hernandez, & Wang, 2014), helping them identify attitudes, beliefs, and value similarities that strengthen cohesion (Woehr, Arciniega, & Poling, 2013). Such cohesion motivates individuals to invest time, energy, and effort in sharing knowledge (Reagans & McEvily, 2003).

In line with the results found by the authors above, research shows that social integration mechanisms impact the individual’s absorption capacity. Lewin, Massini & Peeters (2011) had already ratified this relationship when they pointed out the importance of intra-organizational social integration mechanisms to build connections and shared meanings among the employees of an organization. According to the authors’ statement and what was found in this research, companies use social integration mechanisms among the organization’s members. The latter had a positive impact on the individual ACAP.

In this way, the validation of hypothesis 3 is related to what happens in the studied companies, social interactions between different individuals, which can be understood that management provides an organizational environment where these interactions can happen (Hörbe, Moura, Machado, & Campos, 2021). Social integration mechanisms provide the necessary structure for the exchange of knowledge among its members, increasing the absorption of knowledge between them (Nagati & Rebolledo, 2012).

Felin et al. (2012) is based on the concept of micro-foundations, which includes individuals’ actions and interactions and organizational processes and structures.

Collaborative knowledge absorption only works when individuals who possess valuable knowledge trust other group members and wish to share knowledge with them (Reinholt, Pedersen, & Foss, 2011; Chirico & Salvato, 2016). Positive affect influences the willingness to share knowledge and helps others understand it, positively influencing the recognition of valuable knowledge (Hayton & Cholakova, 2012).

The validation that social integration mechanisms influence individual absorptive capacity, corroborated by the research presented, allows us to recognize that managers implement social integration mechanisms so that employees can exchange information (Zaluski, Hedlund, Cordeiro, & Sausen, 2022). This activity will influence the increase of individual ACAP. The attitude of managers empowers and motivates individuals to acquire, assimilate, transform and apply knowledge.

The survey results prove that individual ACAP positively impacts organizational ACAP. In addition, for us to transform the individual ACAP into organizational ACAP, the MIS is of fundamental importance and must be implemented by the management of companies, but specifically in this study, the SMEs.

This article offers some contributions to the literature on social integration mechanisms, individual and organizational absorptive capacity. First, the focus is on social integration mechanisms and their link to capabilities. When we analyze these links, we seek to clarify a positive relationship between mechanisms and capabilities. Second, we also indicate that individuals form the basis of absorptive capacity at the organization level in SMEs. Absorptive capacity is based on individuals and groups within organizations, i.e., the ability to absorb knowledge. It depends on individual capabilities and therefore depends on structures that connect the capabilities of individuals and teams. Third, the research reinforces previous research, focusing on SMEs, which recognized the importance of intra-organizational mechanisms of social integration to facilitate the absorption of knowledge within an organization. The latter is the main contribution and prompts further research to clarify, in more detail, the effects of MIS on individual and organizational ACAP.

The findings can help SME managers understand the importance of MIS in the development of absorptive capacity. Moreover, MIS can help manage the company, focusing on organizational mechanisms and providing capabilities, expertise, and knowledge to individuals and organizations. From the results, it was observed that social integration mechanisms play a central role in facilitating the process of knowledge transfer, both individual and organizational.

Among the limitations of this research, it is considered the choice of the cross-section in the year 2019. In this way, the results can be influenced according to the context of each organization at the appropriate moment. In addition, the research focused on a relatively small sample of companies in the metal mechanic sector in the state of Santa Catarina, and it is not possible to generalize the results to the same sector or other sectors of the economy. Although the research has limitations in its development, they can be considered research gaps for future studies, initially, with the continuation of the investigation at other moments in time. Thus, it is suggested to periodically replicate the instrument used in this research with companies in the metal mechanic sector in future moments.

Another limitation is the fact that the analyzes are restricted to the sample surveyed for convenience. It is expected to replicate the data collection instrument in other scenarios to investigate whether the hypotheses proposed in this study are verified. A greater understanding of how MIS affects ACAP can contribute to how organizations should be structured and organized and which combinations of MIS lead to better absorption of the ACAP dimensions. Further insight into the importance of ACAP's four dimensions to innovation strategies and their relationship to MIS would provide managers with insights on how to structure their organizations to achieve flexibility and efficiency.

As we conceptualize knowledge absorption at the individual and organization level, future research can adopt multilevel perspectives looking at groups or teams and compare the absorption capacity of different organizations and different groups within the same organization. In this sense, it is also worth studying the interactive effects of social integration mechanisms at the group level or those studied in this research (individual or organizational) with each of the absorptive capacity dimensions. This deeper understanding will have important implications for the design of social integration mechanisms and for organizational initiatives to promote their absorptive capacity.