Linking environmental forces, absorptive capacity, information sharing and innovation performance
| DOI | https://doi.org/10.1108/IMDS-12-2021-0732 |
| Published date | 07 June 2022 |
| Date | 07 June 2022 |
| Pages | 1738-1755 |
| Subject Matter | Information & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems |
| Author | Adegoke Oke,Daniel Prajogo,Moronke Idiagbon-Oke,T.C. Edwin Cheng |
Linking environmental forces,
absorptive capacity, information
sharing and
innovation performance
Adegoke Oke
Department of Supply Chain Management, W.P. Carey School of Business,
Arizona State University, Tempe, Arizona, USA
Daniel Prajogo
Monash Business School, Monash University, Melbourne, Australia
Moronke Idiagbon-Oke
Colangelo College of Business, Grand Canyon University, Phoenix, Arizona, USA, and
T.C. Edwin Cheng
Department of Logistics and Maritime Studies,
The Hong Kong Polytechnic University, Hong Kong SAR, China
Abstract
Purpose –This study seeks to understand how regulatory and competitive forces impact firms’actions and
innovation performance. The study investigates how firms strategize internally and externally to address
regulatory and competitive forces, and how such actions influence firms’innovation performance.
Design/methodology/approach –The data were collected via a survey of 217 managers of business
organizations in Nigeria.
Findings –Regulatory forces have a positive relationship with both absorptivecapacity (AC) and information
sharing (IS). Competitive forces, on the other hand, only have a negative relationship with IS but not with AC.
AC has a positive relationship with innovation performance, while IS, surprisingly, does not have a positive
relationship with innovation performance.
Originality/value –The study contributes to knowledge by empirically validatingthe relationships between
environmental forces and innovation performance; more importantly, the study uncovers the underlying
factors, i.e. IS and AC that link environmental forces and firms’innovation performance.
Keywords Innovation, Regulatory forces, Competitive forces, Absorptive capacity, Information sharing
Paper type Research paper
Introduction
Organizations are faced with a myriad of external environmental forces, many of which are
beyond their control. These range from market-related forces such as technological change,
demand change and competitive forces to other factors that are political, social, legislative
and regulatory in nature (Wan Ahmad et al., 2016). Firms in different contexts face different
environmental forces. The study focuses on two aspects of environmental forces that spur
innovation, namely regulatory forces and competitive forces. Contingency theorists argue
that to improve performance, organizations must strategize and organize as appropriate to
IMDS
122,7
1738
The authors thank the reviewers for their helpful comments on the earlier versions of our paper.
Adegoke Oke was supported in part by the Dean’s Award of Excellence Summer Research Grant, at the
W.P. Carey School of Business, Arizona State University. Cheng was supported in part by The Hong
Kong Polytechnic University under the Fung Yiu King–Wing Hang Bank Endowed Professorship in
Business Administration.
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/0263-5577.htm
Received 1 December 2021
Revised 27 March 2022
2 May 2022
11 May 2022
Accepted 17 May 2022
Industrial Management & Data
Systems
Vol. 122 No. 7, 2022
pp. 1738-1755
© Emerald Publishing Limited
0263-5577
DOI 10.1108/IMDS-12-2021-0732
adapt to different internal and external environmental forces (Martinez-Conesa et al., 2017).
Consequently, much has been written in the business literature on resources and strategies
that organizations develop to adapt to various environmental forces (Kaur and Mehta, 2017).
The main objective is to contribute to this research stream by investigating the specific
mechanisms that firms adopt to improve innovation performance and stay competitive when
faced with regulatory and competitive forces (Chandler and Hwang, 2015).
In terms of motivation, this research is needed because there is a need for empirical studies
that uncover the intervening factors that link regulatory forces with organizational
performance (Wei et al., 2020). In general, firms innovate or adopt innovative practices to cope
with environmental forces (Ozsomer et al., 1997;Prajogo, 2016;Zhang et al., 2017). Thus, to
respond to regulatory and competitive forces, firms must endeavor to develop mechanisms
that will not only be capable of coping with the forces but also enhance their innovation
performance. Such mechanisms serve as intervening factors that link environmental forces
with performance.
More specifically, organizations’response is generally in two forms. First, by organizing
internally, firms develop internal mechanisms to cope with environmental forces. Second,
because environmental forces tend to act on the generality of firms within an industry, firms
seek to develop mechanisms to respond using available resources to cope with them. Thus,
understanding how firms strategize internally and externally to respond to different
environmental forces surrounding their business activities and the effectiveness of these
strategic responses is a key motivation for the study. The study identifies absorptive capacity
(AC) and information sharing (IS) as suitable internal and external mechanisms, respectively,
that firms can develop to innovate and respond to the regulatory and competitive forces
(Kang and Lee, 2017;Ye et al., 2016). When organizations have AC, they have the capability to
quickly scan the external environment, make sense of it and acquire, assimilate, integrate and
exploit knowledge, and craft strategies to respond to any regulatory and competitive forces
found (Arbuss
a and Coenders, 2007). The study defines IS as the sharing of pertinent
information including manuals, proposals and other business information with relevant
supply chain partners. By sharing information with their partners, organizations will be
better able to quickly make sense of the environment and collectively respond to the
environmental forces (Kim and Lee, 2003).
Furthermore, while several studies have examined the drivers of and antecedents to
innovation performance (Covin et al., 2006;Hult et al., 2004;Paladino, 2007;Siguaw et al.,
2006), this study investigates how the internal and external mechanisms developed to
respond to environmental forces actually relate to firms’innovation performance. The study
defines innovation performance as a firm’s superior performance relative to competitors’in
terms of the rates at which new products/services are generated and new processes are
developed.
In sum, the study addresses the following research questions: (1) What are the impacts of
environmental forces (regulatory and competitive forces) on the internal and external
mechanisms (AC and IS with supply chain partners) that firms develop for innovation
improvement? (2) How effective are AC and IS in improving firms’innovation performance?
This study contributes to the literature by empirically establishing the linkage between
environmental forces and the internal and external mechanisms that firms adopt to cope with
those forces. Further, investigating the dual roles of AC and IS as response mechanisms and
antecedents to innovation performance contributes to the stream of literature that has
established the direct link between environmental forces and innovation performance. In this
regard, the study fills an important gap, i.e. identification of AC and IS as intervening factors
that link environmental forces with innovation performance.
The rest of the paper is organized as follows: The next section discusses the theoretical
background of the study and hypothesis development. Next, the study introduces the
External forces,
firm actions
and innovation
output
1739
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