Abstract

Purpose - The purpose of this paper is to examine the multiple paths of absorptive capacity's (AC) effect on business performance (BP): direct effect and indirect effects through innovation and mass customization (MC). Design/methodology/approach - The authors examined the role of innovation and MC capability on the relationship between AC and BP. Data from 278 Chinese firms in four manufacturing industries collected by questionnaire are used to empirically examine the proposed model by Structural equation modeling. Findings - The results show that AC can directly enhance BP, and indirectly through innovation and MC capability. The study also finds that MC capability has a stronger mediating effect than innovation. Originality/value - Prior studies have not yet built linkages between AC and BP with both innovation and MC's effects. This study provides empirical evidence of the effects of AC on BP and three paths are discussed including AC's direct effect and indirect effects through innovation and MC to firm's BP. This study provides a new direction for executives to better understand the movement of knowledge along supply chain and in intra-organizational environment, and of the importance of innovation and MC capability since they are essential carriers for BP enhancement.

Keyword

Absorptive capacity ;  Innovation ;  Business performance ;  Mass customization capability

Abstract

Although many studies employ social network theory to explain firm innovation, how individual-level factors lead to a firm's collective innovation capability remains under-researched. Building on studies that use the work boundary to define formal and informal social interactions, this research aims to illuminate how informal buyer-supplier employee interactions influence buyer firms' innovation capabilities through knowledge acquisition. Integrating the literatures on absorptive capacity and social interaction, the analysis of survey data from 273 Chinese manufacturing firms suggests that employees' informal interactions are positively associated with knowledge acquisition and enhance firms' innovation capabilities. Furthermore, the indirect effects of informal interactions on innovation capability are moderated by knowledge application.

Keyword

Absorptive capacity ;  Informal interaction ;  Innovation ;  Knowledge acquisition ;  Social networking

Abstract

Purpose In innovation networks, firm innovation performance is affected by external tie strength and internal knowledge absorptive capacity. This study aims to empirically examine the path relationship between tie strength, absorptive capacity and firm innovation performance in Chinese manufacturing industries, thus enhance our understanding on the mechanism between innovation network and innovation performance. Design/methodology/approach The authors have conducted a survey among Chinese manufacturers in four industries (textile and garment, household appliance, IT and electronics and motor vehicle assemblers) that are located in North, East, Central and South China, respectively, with a valid response from 278 manufacturers. Structural equation model is used to analyze the results. Findings This study demonstrates that in Chinese Manufacturing industry, tie strength is positively related to innovation performance. The authors also find that absorptive capacity has a positive impact on innovation performance and it mediates the relationship between tie strength and innovation performance. Then, the authors analyze the effect of ownership, industry and sub-region, and the results show that in private firms and traditional manufacturers, and the firms located in North and Eastern China, tie strength has no direct effect on innovation outcomes, but it can influence innovation indirectly through absorptive capacity. Originality/value This study further supports that in Chinese guanxi culture, strong ties with other innovation partners can improve the firm’s absorptive capacity and thus improve innovation performance. The results also suggest that a firm’s absorptive capacity has a significant mediating effect on the relationship between tie strength and innovation performance.

Keyword

Absorptive capacity ;  Innovation performance ;  Tie strength ;  Chinese manufacturing industries