External knowledge sourcing and innovation in family firms

Abstract

Purpose This study aims to investigate the external knowledge search behaviors in terms of search breadth and search depth in family firms and the resultant product innovation in Indian context. The authors theorize the mediating role of absorptive capacity (potential and realized absorptive capacity) between knowledge sourcing from external sources and product innovation. Further, the authors examine the moderating role of crucial internal social capital of the family firm in enhancing the use of external knowledge for firm innovation activities. Design/methodology/approach The study uses a quantitative research design taking single informant for collection of data from 151 family small and medium enterprises in automotive sector in India. The authors use structural equation modeling to test hypothesized relationships. Findings The findings indicate that both search breadth and search depth of family firms are positively associated with product innovation in family firms. The authors also find evidence for partial mediating role of potential and realized absorptive capacity in the relationship between search breadth and innovation and search depth and innovation. The results show how family firms learning taking place while scanning external knowledge sources in terms of external absorptive capacity routines. Finally, the authors find that family firm internal social capital positively moderate the relationship between search breadth and depth, and product innovation. Practical implications Family firms need to innovate to remain relevant in the long-run and as such development of superior capabilities is of great significance to them. Family firm managers must be open to external knowledge as such knowledge help them improve the firm level of innovation through absorptive capacity. Further, family firms must realize and act upon the importance of their social capital for the integration and utilization of acquired knowledge. Originality/value This paper is amongst a few papers that take dynamic capability views of innovation in family firms wherein the authors theorize how external search breadth and depth lead to the development of potential and realized absorptive capacity in family firms. The importance of family firm internal social capital as a strong integrating and knowledge sharing mechanism that helps family firms transform external knowledge into innovation is also highlighted.

Putting the cart (antecedents) before the horse (absorptive capacity): the role of competitive antecedents to the absorptive capacity innovation process

“…For instance, in Ferraris et al ’s (2020b) British food study, a food firm’s AC mediated the relationship between its partnerships to creative industries and the number of food product and service innovations. A similar mediating role was also observed in Akram et al ’s (2020) family business study and Singh et al ’s (2020) small medium enterprise study. A contribution of these and other related mediation studies (Table 1) is that AC’s mediating role is supported by a variety of antecedents that not only span different units of analysis, business types and industry contexts, but that these antecedents show a firm’s competitive advantage in innovation lies upstream to its AC.…”

“…As innovation is based on discovering novel associations amongst different knowledge elements, the diverse aspect of a firm's RAEF not only assimilates diverse external experiences into a firm's AC, but it also offers an important competitive advantage to a firm's innovation (Akram et al, 2020;Ferraris et al, 2020a;Lu et al, 2020;Xie et al, 2018a). This is because a greater diversity of external exchanges offers greater opportunities for the firm to develop norms and routines that relate to a broader range of external experiences.…”

“…AC. While a firm's AC is commonly measured by its R&D intensity (sales/R&D expenditures or R&D expenditures) (Volberda et al, 2010), AC is a multi-dimensional construct (Zahra and George, 2002) and thus cannot be adequately represented by a firm's R&D. Specifically, it is important to recognize that while AC has been measured by its potential and realized components (Akram et al, 2020;Chaudhary and Batra, 2018;Lu et al, 2020;Ortega-Gutie ´rrez et al, 2021;Wu et al, 2019), the focus of this study is to examine the competitive antecedents to the AC concept. In this study, we draw on an approach used by other studies.…”

“…The aggregate and diverse aspects of a firm's RAEF are measured by a firm's strategic alliances or partnerships. Strategic alliances or partnerships reflect a firm's access to external information and are commonly used in AC and OI research (Akram et al, 2020;Ferraris et al, 2020a;Ng, 2011b). To measure the aggregate aspect of a firm's RAEF, a firm's aggregate connectivity, Ag, was constructed by aggregating a firm's Licensing, R&D, Marketing, Manufacturing, Commercializing, Supply and Distribution agreements in the BioScan database (Ng, 2011b;Rothaermel and Deeds, 2004).…”

“…Studies have shown that AC mediates the relationship between a firm's search -breadth/ depth-and its innovation (Akram et al, 2020;Lu et al, 2020;Xie et al, 2018aXie et al, , 2018b). Yet, a firm's relative advantage in accessing the information from these different types of search has not been examined by mediation studies (Table 1).…”