Publication: SAM Advanced Management Journal
Publication Date: 22-MAR-04
Format: Online - approximately 3850 words
Delivery: Immediate Online Access
Author: Daghfous, Abdelkader
Article Excerpt
The growing attention to organizational innovation in manufacturing firms reflects the sustainable competitive advantage fostered by superior dynamic capabilities. Knowledge-based competition has magnified the importance of learning alliances as a fast and effective way to develop such capabilities. To achieve a competitive advantage, firms need better quality, improved efficiency, innovation, and customer experience. This requires a constant search for new tools and management opportunities that would provide these competencies. Supply chain management, total quality management, business process reengineering, enterprise resource planning, customer relationship management, e-commerce, and knowledge management are some of these tools. Many firms, however, are prevented from adopting them by cultural factors (Buch and Rivers, 2001), organizational inertia (Welsch, Liao and Stoica, 2001), or a lack of absorptive capacity (Boer, Bosch and Volberda, 1999).
Successful managing of internal operations and supply chains is a key challenge to organizations. They will not succeed if they implement business practices in an arbitrary and uncoordinated manner, expending scarce resources on unproductive initiatives. In this context, Carillo and Gaimon (2000) found that firms should not invest in process change until they have sufficient relevant knowledge. However, learning-before-doing is typically undervalued, so firms tend to underinvest in the development of absorptive capacity (Cohen and Levinthal, 1994). Absorptive capacity is what enables the firm to effectively acquire and utilize external as well as internal knowledge, which, in turn, affects the firm's ability to innovate and adapt to its changing environment and be competitive. It gives the firm the ability to be proactive and build various competences, as opposed to reacting, to the industry's dynamism.
Absorptive Capacity Defined
To understand organizational innovation and best practices from an absorptive capacity perspective, it is necessary to define the term. There have been many attempts to define it. Zahra and George (2002) defined it as a set of organizational routines and processes by which firms acquire, assimilate, transform, and exploit knowledge to produce a dynamic organizational capability. Absorptive capacity has also been defined as the capacity to learn and solve problems (Kim, 1997) and as the firm's ability to identify, assimilate, and exploit outside knowledge (Cohen and Levinthal, 1990). Acquiring absorptive capacity consists of building (1) the firm's ability to access external knowledge, which requires a knowledge-sharing culture, and (2) the firm's ability to transform and implement external knowledge within the company to enhance its core competencies.
One way of measuring absorptive capacity is to ascertain the level of research and development (R&D), since R&D plays an important role in building and increasing a firm's knowledge-sharing and absorptive capacity. However, important, R&D it is not enough on its own. Other factors, such as training and education, are also important for the increase of knowledge transfer and absorptive capacity.
Elements of Absorptive Capacity
There are four different but complementary dimensions of absorptive capacity: acquisition, assimilation, transformation, and exploitation. These four elements must progress chronologically.
Acquisition is defined as the ability to recognize, value, and acquire external knowledge that is critical to a firm's operations (Lane and Lubatkin, 1998; Zahra and George, 2002). Hamel (1991) defined the acquisition of new specialized knowledge as the motivation for establishing inter-organizational collaborations. A simpler definition defines it as the generator of knowledge for the organization (Welsch, Liao, and Stoica, 2001). Acquisition depends on the following: prior investments, such R&D, prior knowledge, intensity in terms of the capability to develop new connections, speed of a firm's efforts to acquire external knowledge, ant strategic direction.
Assimilation refers to the firm's ability to absorb external knowledge. It can also be defined as a firm's routines and processes...
NOTE: All illustrations and photos have been removed from this article.
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