Absorptive capacity: Relevancy for large and small enterprises

Background: Over the years, there has been a growing interest in organisational research in the absorptive capacity (AC) construct, but only a few theoretical and empirical studies on this topic have been carried out over the last decade. However, a number of scholars and practitioners have continued to cite AC as a significant factor in determining the success or failure of organisations. With the dramatic changes in business environments, there has been a growing rise in the use of knowledge by organisations to help improve and maintain their competitiveness and consequently their survival. AC is a fundamental element that helps organisations to gain competitive advantage by producing commercial products or services through the transformation of knowledge. Objective: The purpose of this article is thus to provide a review of the literature on this subject with the aim of finding out how both large and small enterprises stand to benefit from AC. We intend to affirm that, by successfully carrying out a learning process that is characterised by the exploration and exploitation of external knowledge and the organisation’s current knowledge base, organisations can realise competitive advantage irrespective of their size. Method: In the literature search, three approaches were employed, namely academic databases, online search engines and a review of references of related studies which led to more relevant articles and works whose references were further reviewed and analysed. Content analysis was done on all collected articles for quality appraisal and synthesis, the results of which we present as discussions on various sections of this paper leading to answering of our study objective. Only peer-reviewed articles were used. Results: Our findings reveal that, irrespective of the organisation’s size, it can benefit significantly from AC. The study further reveal that AC is a strong predictor of an organisation’s performance and hence a strategic asset for the organisation. Organisations with high AC are able to learn how to utilise new knowledge within their processes and come up with changes that improve their competitive advantage. Conclusion: We submit that, because AC is a strong predictor of an organisation’s performance, it is imperative that the necessary measures are taken to improve the levels of AC for all firms, irrespective of their size.