Evolving absorptive capacity: the mediating role of systematic knowledge management

Absorptive capacity is mediated through knowledge management capacity on innovation output and performance in technology-oriented firms. While prior research work has focused on the direct effect of absorptive capacity on innovation, in this paper, our model posits that absorptive capacity is more efficient in promoting firms' innovation provided that it is supported by systematic knowledge management practices. We tested this model that included all four components of absorptive capacity using a sample of 127 manufacturing and technology firms in Croatia. Structural equation modeling procedures were used to test hypotheses. Our findings confirm the significance of the relationship between absorptive capacity and knowledge management within firms. Furthermore, we found that firms with higher acquisition and transformation dimensions of absorptive capacity can enhance and replenish their knowledge management practices, which in return result in higher innovation output. These findings extend previous research work by explaining the sometimes-contradictory findings concerning knowledge management practices, which firms may adopt to enhance their absorptive capacity.