Unpacking the mechanisms linking internationalization and innovation: the sequential roles of potential and realized absorptive capacities

What the paper says

Purpose Drawing on organizational learning and dynamic capability perspectives, this study aims to examine the distinct and sequential roles of potential and realized absorptive capacity in influencing firms’ innovation performance. Specifically, the authors investigate how firms develop potential absorptive capacity through the acquisition and assimilation of knowledge from international technology partnerships, international suppliers and international customers and how this capacity is subsequently converted into realized absorptive capacity – the transformation and exploitation of knowledge – to generate innovation. By unpacking these absorptive-capacity processes, the authors explain how access to internationally embedded knowledge sources enhances firms’ ability to internalize and recombine external knowledge, thereby improving innovation outcomes. Design/methodology/approach The authors use qualitative interviews and survey data from Canadian small- and medium-sized firms. The authors employ bootstrapped partial least squares structural equation modeling to test the hypotheses. To ensure robustness, the authors ensure the model’s validity, reliability and address common method bias. In addition, the authors address endogeneity concerns by applying the Gaussian copula approach. Findings The results support the hypotheses that firms engaged in international technology partnerships and sourcing from international suppliers have greater opportunities to develop potential absorptive capacity than domestically focused firms. This enhanced potential absorptive capacity, in turn, facilitates the development of realized absorptive capacity, which positively affects innovation performance. Originality/value The study advances existing research by shifting the focus from internationalization–innovation associations to the process-based mechanisms through which firms convert international knowledge exposure into innovation outcomes. Rather than treating absorptive capacity as a unitary construct, the authors distinguish between potential and realized absorptive capacity and theorize their sequential roles in acquiring, assimilating, transforming and exploiting knowledge obtained from international technology partnerships, international suppliers and international customers. By integrating insights from literature on learning through exporting, importing and R&D alliances into a unified process framework, the study provides a more fine-grained explanation of organizational learning by internationalizing. In doing so, it contributes to international business and innovation research by demonstrating how the subprocesses of potential and realized absorptive capacity operate as distinct but interdependent mechanisms linking international engagement to innovation performance.