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Procedia - Social and Behavioral Sciences 235 (2016) 764 – 770

12th International Strategic Management Conference, ISMC 2016, 28-30 October 2016, Antalya,
Turkey

The Effect of Technological Innovation Capabilities and Absorptive

Capacity on Firm Innovativeness: A Conceptual Framework
Huseyin Incea *, Salih Zeki Imamoglua, Hulya Turkcana
a
Gebze Technical University, Kocaeli, 41400, Turkey

Abstract

In today’s rapidly changing environment, firms have to adapt to this conditions and open to innovations in order to survive.
Innovativeness is vital for gaining competitive advantage. Technological innovation capabilities make it possible for firms to
response to changes rapidly and to acquire technological innovation strategies and innovative outputs. Absorptive capacity enabling
the firms to obtain the information necessary, allows firms to make the external knowledge useful, to take opportunities in the
market, to come to a leading position and to develop new capabilities. Technological innovation capabilities and absorptive capacity
are critical factors of innovativeness and thereby competitiveness.
The aim of this study is to investigate the effects of technological innovation capabilities and absorptive capacity on innovativeness.
The extensive literature review is undertaken to develop the hypotheses and explain the relationships among technological
innovation capabilities, absorptive capacity and innovativeness. Based on these arguments, we propose a conceptual model to
explain the relationships.
© 2016
© 2016TheTheAuthors.
Authors.Published
Published
byby Elsevier
Elsevier Ltd.Ltd.
This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the organizing committee of ISMC 2016.
Peer-review under responsibility of the organizing committee of ISMC 2016.
Keywords: Technological innovation capabilities, Absorptive capacity, Innovativeness.

1. Introduction

In today’s world, technology develops rapidly, competition becomes global and more difficult, consumer’s needs
and expectations constantly increase and change, and product life cycles get shorter. Firms should adapt to dynamic

* Corresponding author. Tel.: +90-262-605-1428

E-mail address: h.ince@gtu.edu.tr

1877-0428 © 2016 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the organizing committee of ISMC 2016.
doi:10.1016/j.sbspro.2016.11.078
 Huseyin Ince et al. / Procedia - Social and Behavioral Sciences 235 (2016) 764 – 770 765

market structure and respond with innovative outputs in order to survive, provide a competitive advantage, make this
advantage sustainable, maintain and increase their market share. Under these conditions, innovativeness is vital for
firms.

In addition to making innovations responding promptly to changes and developments, the capabilities possessed
have great importance to be successful in the global market. Dynamic capabilities are firm’s abilities to integrate
competences in order to adapt to environment (Teece, Pisano & Shuen, 1997). Firms should adapt to market conditions
and respond to changes immediately to be successful (Hurley & Hult, 1998). For this purpose, they should be in
communication with their environment. Thus firms can acquire knowledge and take opportunity. While absorptive
capacity enables firms to acquire and to exploit knowledge (Zahra & George, 2002), technological innovation
capabilities enable firms to both making innovations (Adler & Shenbar, 1990) and reorganizing the interorganizational
functions considering market structure.

According to Guan and Ma (2003), technological innovation capabilities which allow firms to gain sustainable
competitive advantage are seen as dynamic capabilities. Absorptive capacity not only plays a critical role in
competitiveness (Camisón & Forés, 2010), but also enables firms to come to leading position (Cohen & Levinthal,
1990) and to develop dynamic organizational capabilities (Zahra & George 2002; Camisón & Forés, 2010; Chang,
Chen & Lin, 2014).

This study aims to investigate the effect of absorptive capacity on technological innovation capabilities, the effect
of technological innovation capabilities and absorptive capacity on innovativeness. For this purpose, we come up with
a conceptual model based on extensive literature review. Then, research hypotheses are developed and a theoretical
model is proposed. Finally, implications and recommendations are stated.

2. Literature Research

2.1. Technological Innovation Capabilities

Technological innovation capabilities are considered as the one of the key factor of competitive advantage (Guan
& Ma, 2003: Yam et al., 2004). Technological innovation capabilities are abilities to adapt to unexpected technological
change, develop new products and use new technological processes in order to meet current and expected future needs
(Adler & Shenbar 1990). Wang, Lu and Chen (2008) argue that technological innovation capabilities is a multi-
dimensional concept. Technological innovation capabilities defined as firm’s special assets Guan and Ma (2003)
facilitate and support firm’s technological innovation strategies (Burgelman, 1996).

The researchers defined technological innovation capabilities in a variety ways and as a multifaceted and complex
construct. Christensen (1995) used asset approach. According to his study scientific research asset, product innovative
assets, process innovative asset and aesthetic design assets are explained as the elements of technological innovation
capabilities. Chiesa, Coughlan and Voss (1996) used process approach and indicate that technological innovation
capabilities involves organizational process and activities. Technological innovation capabilities are formed by
concept generation capability, product development capability, process innovation capability, technology acquisition
capability, leadership capability, the deployment of resources capability and capability in effective use of systems and
tools. Yam et al., (2004) classify technological innovation capabilities into seven dimensions, which are learning
capability, R&D capability, manufacturing capability, marketing capability, resource allocation capability, organising
capability and strategic planning capability based on functional approach.

Learning capability is the ability to internalize new knowledge essential to gain competitive advantage (Guan &
Ma, 2003). Manufacturing capability is the ability to produce products to adapt market conditions by using R&D
outputs (Yam et al., 2004). Marketing capability is the ability to make a difference in marketing activities in order to
766 Huseyin Ince et al. / Procedia - Social and Behavioral Sciences 235 (2016) 764 – 770

differentiate own’s products (Cheng & Lin, 2012). R&D capability is the ability to develop new products by using
new approaches and technologies (Guan & Ma, 2003). Resource allocation capability is the ability to compile
appropriate resources for innovation process (Yam et al., 2004). Organising capability is the ability to organise all
activities in order to speed up innovation processes (Guan & Ma, 2003). Strategic planning capability is the ability to
make strategic plans which is compatible with firm’s vision and mission by taking into consideration firm’s
specifications objectively (Yam et al., 2004).

2.2. Absorptive Capacity

Absorptive capacity enables firms to use of knowledge obtained from outside efficiently (Matusik & Heeley, 2005)
and to convert these knowledge to outputs having economic value (Murovec & Prodan, 2009). Therefore, it is a
dynamic capacity to have a major impact on gaining competitive advantage (Camisón & Forés, 2010).

Absorptive capacity is first discussed as a concept related to economic growth and ability to benefit from external
sources by Adler (1965). Cohen and Levithal (1990) define absorptive capacity as “an ability to recognize the value
of new information, assimilate it, and apply it to commercial ends”. Lane and Lubatkin (1998) examine absorptive
capacity in inter-organizational context and explained the context in firm pairs which are student and teacher firm
having relative characteristics. Zahra and George (2002) reconceptualize the concept and define as “a set of
organizational routines and processes by which organizations acquire, assimilate, transform, and exploit knowledge
to produce a dynamic organizational capability”. Thus, absorptive capacity is an organizational capability and
facilitates the development of organizational capabilities.

Since absorptive capacity is “a dynamic capability which creates new firm resources by searching, acquiring,
assimilating, transforming and exploiting external knowledge with internal resources and act as a process framework
for innovation (Patterson & Ambrosini, 2015)”, it is a process-based and multi-dimensional concept. Therefore,
absorptive capacity can be seen as one of the dynamic capabilities of a firm.

Absorptive capacity is effected by the prior related knowledge and employee’s absorptive capacities (Cohen &
Levinthal, 1990). Development of absorptive capacity in addition to firms to acquire competitive advantage, is also
important to increase the knowledge. In this way, these knowledge will be effective in recognition of value of new
knowledge later (Todorova & Durisin, 2007).

Studies agree on that absorptive capacity is a multi-dimensional construct. According to Cohen and Levinthal
(1989, 1990), absorptive capacity has three dimensions: recognizing value of external new knowledge, assimilation
and applying it. Zahra and George (2002) reconceptualize the concept and suggest that acquisition, assimilation,
transformation and exploitation are the dimensions of absorptive capacity. Moreover they argue that absorptive
capacity consists of two subset: potential absorptive capacity and realized absorptive capacity. The former two
dimensions represents potential absorptive capacity and the latter two dimensions represents realized absorptive
capacity (Zahra & George, 2002). Todorova and Durisin (2007) suggest that absorptive capacity has four dimensions:
recognition, acquisition, assimilation or transformation and exploitation. Acquisition is the ability to acquire critical
external knowledge (Zahra & George, 2002). Assimilation is the ability to absorb and internalize acquired knowledge
(Camisón & Forés, 2010). Transformation is the ability to convert assimilated knowledge into own firm’s routines
(Jiménez-Barrionuevo, García-Morales & Molina, 2011). Exploitation is the ability that enable firms both to improve
current competencies and to create new things by using transformated knowledge (Zahra & George, 2002).

2.3. Innovativeness

Innovation has increasingly been taken into consideration by many scholars after Schumpeter’s study (1934). The
importance of innovation is best expressed by Drucker (2010) “innovate or die” that is the popular mantra nowadays
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for all firms.

Schumpeter (1934) defines innovation as introduction of a new product, opening of a new market, using new
sources of supply, launch of a new technique for production and implementation of new forms of organization.
Innovation is defined as “the implementation of a new or significantly improved product (good or service), or process,
a new marketing method, or a new organisational method in business practices, workplace organisation or external
relations.” (OECD, 2005).Considering definitions of innovation, it is seen obviously that innovation is indicated as a
process in some of these definitions, whereas innovation is indicated as an output in the other part of definitions.
Namely, innovation can be explained as both process and result of this process (Narayanan, 2000). Innovation can be
both a response to changing environment and a reason of change (Damanpour, 1996).This can be internal or external
environment of firm. Both of them are effective in the development of innovation, in addition they are affected by
results (Hult, Hurley & Knight, 2004).

Innovativeness is willingness to promote change, creativity and novelty in order to develop new product and
processes (Lumpkin & Dess, 1996). Hurley and Hult (1998) state that innovativeness is a part of firm’s culture and
define the term as openness to change. In macro perspective, innovativeness is “the capacity of a new innovation to
create a paradigm shift in the science and technology and/or market structure in an industry”, and in micro perspective,
it can be seen as “the capacity of a new innovation to influence the firm’s existing marketing resources, technological
resources, skills, knowledge, capabilities or strategy” (Garcia & Calantone, 2002). Firm innovativeness is the result
of innovation process (Alexiev, Volberda & Van den Bosch, 2016).

3. Hypotheses Development and Conceptual Framework

3.1. Technological Innovation Capabilities and Absorptive Capacity

Knowledge plays a vital role for both technological innovation capabilities and absorptive capacity. Prior
knowledge of organization facilitates the development of absorptive capacity (Cohen & Levinthal, 1990). Absorptive
capacity also enhances knowledge of organization and thus the knowledge output of absorptive capacity will affect
the development of absorptive capacity later (Todorova & Durisin, 2007). In short, absorptive capacity make it
possible to transfer new and required knowledge into organization. In this way, it ensures the development of
capabilities that organization has (Zahra & George, 2002).

Considering the firms which cannot adapt themselves to market conditions, it may be observed that their
capabilities are insufficient (Teece, Pisano & Shuen, 1997). This is because of the lack of interaction with
environment. If firms interact wıth their environment, they can acquire new knowledge and thereby improve their
capabilities. Absorptive capacity allows firms to internalize the knowledge about marketplace and competitors and as
a result it enhances technological innovation capabilities. Liao et al., (2009) best summarize that in one sentence: “If
we consider organization as a system, knowledge is its input, absorptive capacity is it’s processing, and innovation
capability is its output”. Therefore, we hypothesized that:

H1: Absorptive capacity positively related to technological innovation capabilities.

3.2. Technological Innovation Capabilities and Innovativeness

Firms should adapt to dynamic market structure and respond to change and improvement in technology by
innovation to survive. Therefore firms should harmonize their existing assets and resources to constantly changing
environmental conditions (Wang, 2008). Dynamic capabilities have an important role for firms in adapting change in
market (Teece, Pisano & Shuen, 1997) and in gaining competitive advantage (Teece & Pisano, 1994). Dynamic
capabilities are also a vital source for determining the firm’s innovativeness (Giniunienea & Jurksiene, 2015).
768 Huseyin Ince et al. / Procedia - Social and Behavioral Sciences 235 (2016) 764 – 770

Technological innovation capabilities are important dynamic capabilities (Lahovnik & Breznik, 2013).
Technological innovation capabilities provide firms to develop new products (Adler & Shenbar, 1990), and facilitite
technological innovation strategies (Burgelman, 1996). They also improve firm’s technological innovation
performance (Zandhessami et al., 2012) and business performance (Yam et al., 2010). If firms improve their
technological innovation capabilities, they can gain competitive advantage (Yam et al., 2010) through innovation
(Karagouni & Papadopoulos, 2007). Therefore, we hypothesize that:

H2: Technological innovation capabilities positively related to innovativeness.

3.3. Absorptive Capacity and Innovativeness

Firms should recognize the opportunities in the environment and create a value by using these opportunities to gain
competitive advantage. Cohen and Levinthal (1990) indicate that external knowledge is an imperative source of
innovation. Absorptive capacity helps firms to acquire external knowledge and to create value by assimilating and
converting this knowledge (Murovec & Prodan, 2009). Leal-Rodríguez et al., (2014) define absorptive capacity as “a
set of organizational routines and processes by which firms acquire, assimilate, transform, and exploit knowledge to
produce a dynamic organizational capability that will be rendered in the enhancement of the innovation outcomes”.
According to this definition, it can be said that innovation is one of the outcome of absorptive capacity.

The researchers argued that absorptive capacity enables firms to leverage their product innovativeness by
establishing collaborative networks with external actors, following the new technological trends and knowledge
realizing the similarities between external and their existing knowledge base. Prior studies agree on that absorptive
capacity enhances innovation (Cohen & Levinthal, 1990; Zahra & George, 2002; Todorova & Durisin, 2007; Murovec
& Prodan, 2009), innovation performance (Cohen & Levinthal, 1990; Chen et al., 2009) and performance (Zahra &
George, 2002; Lane et al., 2006; Todorova & Durisin, 2007). As is seen from the literature, there are many studies
relating absorptive capacity and its outcomes because of its effect on gaining competitive advantage. Innovativeness
also can be considered as the output of absorptive capacity (Cepeda-Carrion et al., 2012). Therefore, we hypothesize
that:

H3: Absorptive capacity positively related to innovativeness.

Figure 1 shows that the relationships between technological innovation capabilities, absorptive capacity and
innovativeness. This model is proposed according to hypotheses: H1, H2, H3.

Fig. 1. Proposed research model

 Huseyin Ince et al. / Procedia - Social and Behavioral Sciences 235 (2016) 764 – 770 769

4. Discussion and Conclusion

This study contributes to literature by proposing a conceptual model which demonstrates the effects of
technological innovation capabilities and absorptive capacity on innovativeness and the effect of absorptive capacity
on technological innovation capabilities. Previous studies agree on that innovativeness is essential requirement for
firms. Thus, there are many studies investigating the antecedents and consequences of innovativeness. Dynamic
capabilities are also examined in numerous studies. Technological innovation capabilities and absorptive capacity are
key factors for innovativeness. Because of this, revealing the relationships between these concepts are important for
literature. According to conceptual model, it is proposed that firms with high absorptive capacity are more innovative
and they can develop their technological innovation capabilities. It is also proposed that firms with advanced
technological innovation capabilities are more innovative than their competitors.

The model outlining relationships between variables, which have crucial importance to enhance firm performance
and to gain competitive advantage, will be a beneficial source for researchers. In future researches, the proposed model
will be validated by empirical studies. The further researches will also carry out to investigate effects of dimensions
of absorptive capacity on dimensions of technological innovation capabilities and on innovativeness, effects of
dimensions of technological innovation capabilities on innovativeness separately.

In this study, the relationship between technological innovation capabilities and absorptive capacity, the
relationship between technological innovation capabilities and innovativeness and the relationship between absorptive
capacity and innovativeness are clarified. It is concluded that; absorptive capacity has a positive impact on
technological innovation capabilities and moreover technological innovation capability and absorptive capacity have
a positive impact on innovativeness. In this study, a theoretical model is proposed to show these relationships. For this
purpose, relevant literature is reviewed in detail and hypotheses about these relationships are developed.

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