Clarifying absorptive capacity and dynamic capabilities dilemma in high dynamic market IT SMEs

Date12 August 2019
Publication Date12 August 2019
AuthorChulatep Senivongse,Alex Bennet,Stefania Mariano
SubjectInformation & knowledge management,Knowledge management,Knowledge management systems
Clarifying absorptive capacity and
dynamic capabilities dilemma in
high dynamic market IT SMEs
Chulatep Senivongse
Institute of Knowledge and Innovation Southeast Asia, Bangkok University,
Bangkok, Thailand
Alex Bennet
Mountain Quest Institute, Marlinton, West Virginia, USA and
Institute for Knowledge and Innovation Management, Bangkok University,
Bangkok, Thailand, and
Stefania Mariano
School of Business Administration, American University of Sharjah,
Sharjah, United Arab Emirates
Purpose The purpose of this study is to investigate absorptive capacity and dynamic capabilities dilemma in
high dynamic market IT small medium enterprises (SMEs). Absorptive capacity and dynamic capabilities have a
conict in theoretical stance. Those in favor of dynamic capabilities regard absorptive capacity as a part of
dynamic capabilities, and there are many arguments regarding treating absorptive capacity as a part of dynamic
capabilities. One major decit of dynamic capabilities is that it requires adjusting the rms dynamic resources
when responding to change, requiring some investment and time. Thus, dynamic capabilities then have a
problem in instantaneously responding to a highly dynamic market. With the requirement to adjust
organizational resources, absorptive capacity, as a part of dynamic capabilities, cannot have direct impact on a
rms performance.
Design/methodology/approach To show that absorptive capacity,by itself, can have a direct impact
on a rms performancein a highly dynamic market, quantiable variables are identiedto measure the level
of effort in developing absorptive capacity. The relationshipsbetween the absorptive capacity development
effort and the rmsnancialperformance is then explored andevaluated.
Findings It is conrmed that absorptivecapacity in a high dynamic market such as IT SMEs have direct
and positive impact to the rmsnancial performance, without having to congure its resource to interact
with changes.
Originality/value The study discussesthe paradoxical dilemma of the role of absorptive capacityunder
the light of dynamic capability. The nding indicates that in high dynamic market when the spontaneous
respond to market change is crucial to rms survival, absorptive capacity can direly deliver the result to
leverage the rms performance without having to recongure its resources as indicated in the theoretical
stance of dynamiccapability.
Keywords Dynamic capabilities, Absorptive capacity, Knowledge management, Absorptive
capacity metaroutines, Organizational process and routines
Paper type Research paper
1. Introduction
The survival of a rm depends on knowledge (Martín-de Castro, 2015;Tseng et al.,2011).
Every decision an organization makes is determined by knowledge, and the value of that
Received21 November 2018
Revised26 July 2019
Accepted28 July 2019
VINEJournal of Information and
KnowledgeManagement Systems
Vol.49 No. 3, 2019
pp. 372-396
© Emerald Publishing Limited
DOI 10.1108/VJIKMS-11-2018-0105
The current issue and full text archive of this journal is available on Emerald Insight at:
knowledge can be determined by the effectiveness of the outcome of that decision (Bennet
et al.,2015). In a highly dynamic market where product and service evolve almost
instantaneously,attaining new knowledge is necessary for a rms survival (Lee et al.,2010).
While the rm with internal capabilityto innovate may have to adjust its internal resources
to react to a dynamic threat, there are many rms that rely on external knowledge (Dutta,
2012;Lee et al., 2010;Park, 2011).These rms need absorptive capacity to capitalize on new
knowledge to increasetheir performance and competitiveness.
Since its original development, absorptive capacity has been addressed as a crucial
(Chalmers and Balan-Vnuk, 2013;Lewin et al.,2011) aspect of any organizational life,
although till today it represents a difcult construct to be operationalized and measured
on and Forés, 2010;Jiménez-Barrionuevo et al., 2011). To overcome this issue, latest
developments in absorptive capacity propose a metaroutines perspective that helps a more
direct identication and measurement of internal and external routines involved in
knowledge-absorption processes (Chalmers and Balan-Vnuk, 2013;Lewin et al.,2011). The
analysis of these routines can, in turn, be used to provide a more direct measurement of a
rmsnancial performance.
In contrast, dynamic capabilitiesare the organizational process and routines to integrate,
construct, and recongure internal and external competencies to address the threat from a
rapidly changing of market environment (Eisenhardt and Martin, 2000;Teece et al.,1997).
This involves the reconguration of resources and the upgrade of core capabilitiesto attain
and sustain competitive advantage (Wang and Ahmed, 2007). Owing to this nature, some
scholars dene absorptive capacity as a part of dynamic capabilities (Zahra and George,
2002). The major distinction between the two is the triggering source of the inow of
knowledge. Absorptive capacity absorbs new knowledge from the external environment
(Cohen and Levinthal, 1989), while dynamic capabilities treats both external and internal
knowledge of equal importance (OReilly and Tushman, 2007). However, dynamic
capabilities require the recongurationof a rms practices to sustain the rms operation in
responding to the external threatof market turbulence. Reconguration always means time
and cost (Winter, 2003). This raises theissue of whether dynamic capabilities are the best t
for a rm in a high turbulencemarket.
This paper addresses and discusses the contradictions between the two constructs
absorptive capacity and dynamic capabilities and empirically uses dened measures and
relationshipsto clarify the contradiction.
2. Theoretical background
2.1 Absorptive capacity
This study uses the theoretical framework on absorptive capacity of Todorova and
Durisin (2007) as the foundation. This framework is based on the latest renement of
the original construct developed by Cohen and Levinthal (1989). Within this
framework, absorptive capacity is seven-pronged. It includes the rms ability to
identify new external knowledge, recognize the value of this knowledge, acquire the
new knowledge, assimilate the new knowledge, transform the new knowledge to tthe
rms capabilities and use the new knowledge to create competitive advantage.
The concept of new knowledgein this study means knowledge that the rm does not
have; it may not be new knowledge to the world. It can be knowledge from within the
industry within which the rm resides, from competitors or even from other industries
(Ghauri and Park, 2012;Murray and Chao, 2005). The rm with a low level of
absorptive capacity will have less ability to identify and recognize the value of this new
knowledge and assimilate it to benet the future of the rm (Szulanski, 1996).
High dynamic
market IT

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