Organizational processes for information processing and knowledge management (Easterby-Smith and Prieto, 2007; Szulanski, 1996) have been studied in a substantial body of work, both in the dynamic (Eisenhardt and Martin, 2000; Teece et al., 1997; Wilden et al., 2012) and knowledge-based view of the firm (Grant, 1996). Especially, researchers in the fields of innovation and strategic marketing have illuminated the competitive value of an organization's outside-in information processing capabilities (Arbussa and Coenders, 2007; Baker and Sinkula, 2007; Day, 2002). Not surprisingly, absorptive capacity (Cohen and Levinthal, 1990) has grown into an intensively studied concept (Camison and Forés, 2010; Todorova and Durisin, 2007; Volberda et al., 2010), linking internal organization processes to innovation outcomes. Notwithstanding its contributions, research on absorptive capacity has so far remained predominantly confined to innovations of a technological kind (Beckeikh et al., 2006, Lane et al., 2006; Rothaermel and Alexandre, 2009) and several research gaps remain (Volberda et al., 2010).
Still, the study of non-technological types of innovation is growing steadily (Birkinshaw et al., 2008). In particular, the concept of “strategic innovation” has caught the eye of academia and business. This type of innovation follows a Schumpeterian perspective, focusing on innovation of the business model and breaking with industry rules of competition (e.g., Christensen, 1997; Kim and Mauborgne, 1999; Markides, 1999, 2006; Gunther McGrath, 2010; Teece, 2010; Yu and Hang, 2010). As companies creating these kinds of innovations show high revenue and profit growth (Kim and Mauborgne, 1999) a deeper understanding of the organizational capabilities driving strategic innovation would be highly relevant. Yet, given its nascent status, strategic innovation research shows a lack of validated and quantitative studies (Govindarajan and Kopalle, 2006). Moreover, insights on organizational capabilities for information processing in the context of technological innovation may prove difficult to transfer to the field of strategic innovation as different types of innovation may require different information search and processing strategies (Sidhu et al., 2007) and different managerial interventions (Abernathy and Clark, 1985).
The purpose of this paper is hence to explore the deliberate mechanisms that firms, seeking to stimulate their strategic innovation, can establish to affect the different dimensions of absorptive capacity. Cohen and Levinthal (1990) and Kim (1998) already argued that the development of absorptive capacity requires dedicated managerial effort. In the context of fundamentally new strategic moves, deliberate learning is considered more effective than semi-automatic experience accumulation (Zollo and Singh, 2004), even in domains where the firm lacks experience (Lenox and King, 2004). However, insights into the specific organizational mechanisms that enhance strategic learning is still limited (Barkema and Schijven, 2008). Furthermore, broadening absorptive capacity to the area of strategic innovation offers the opportunity to make the concept more reconcilable with the issue of path-breaking change (Karim and Mitchell, 2004).
Building on a literature review and field data, we re-interpret absorptive capacity through a cognition lens and argue that deliberate learning mechanisms can affect specific practices for recognition, assimilation and exploitation of new ways to create customer value. These ideas are empirically tested on a sample of Dutch industrial firms by means of variance-based structural equations modeling (PLS Path Modeling) (Hair et al., 2011a and Hair et al., 2011b). Our results illustrate which deliberate mechanisms affect the different dimensions of absorptive capacity in such a way that the organization's strategic innovation capacity is strengthened. PLS is a powerful method to bring this to the fore as it emphasizes prediction of the dependent variables (Hair et al., 2011b; Reinartz et al., 2009), in this case the strategic innovation capacity.
This study contributes to the literature in different ways. First, our findings demonstrate the value of intentionally stimulating absorptive capacity for strategic innovation. A particular contribution to the strategic management literature lies in the integration of the absorptive capacity concept with insights from sensemaking research, bringing the importance of shared mental models in an organizational information processing capability to the fore (Lane et al., 2006; Todorova and Durisin, 2007), and questioning the strong path-dependent character of absorptive capacity (Cohen and Levinthal, 1990; Liao et al., 2003). In addition, our research adds to the dynamic resource based view (Teece et al., 1997) as it further evidences how firms develop competence not only by accumulating experience but also by investing time and effort in activities that require a more cognitive effort (Kale and Singh, 2007; Zollo and Winter, 2002). Considering absorptive capacity as a dynamic capability (Narasimhan et al., 2006; Zahra and George, 2002), this study sheds light on concrete second-order mechanisms for dynamic capability creation (Danneels, 2008). Finally, our study contributes to the field of innovation management and marketing management as it illuminates micro-level implications of strategic innovation capacity creation (Rajagopalan and Spreitzer, 1996) by showing clearly that new value creation requires experience in specific “market driving” capabilities beyond the traditional marketing toolkit. As such, it offers managers concrete tools for stimulating proactive market approaches.
Our account begins with a conceptual integration of strategic innovation (further referred to as SI) and absorptive capacity (further referred to as ACAP). Combining existing literature with qualitative findings, we then develop hypotheses regarding different deliberate learning mechanisms for the three dimensions of ACAP: recognition, assimilation and exploitation. After explaining the quantitative research design and method, we will present and discuss the findings of the hypothesis testing. The paper concludes with theoretical and managerial implications and suggestions for future research.
