Absorptive capacity and business performance: The mediating effects ofinnovation and mass customization

Author:  Xueyuan Liu(刘学元), Haiyun Zhao, Xiande Zhao
Publication:  Industrial Management and Data System
Abstract:  The purpose of this paper is to examine the multiple paths of absorptive capacity’s (AC) effect onbusiness performance (BP): direct effect and indirect effects through innovation and mass customization (MC).The authors examined the role of innovation and MC capability on the relationship between AC and BP. Data from 278 Chinese firms in four manufacturing industries collected byquestionnaire are used to empirically examine the proposed model by Structural equation modeling. The results show that AC can directly enhance BP, and indirectly through innovation and MCcapability. The study also finds that MC capability has a stronger mediating effect than innovation.Prior studies have not yet built linkages between AC and BP with both innovation andMC’s effects. This study provides empirical evidence of the effects of AC on BP and three paths are discussedincluding AC’s direct effect and indirect effects through innovation and MC to firm’s BP. This study providesa new direction for executives to better understand the movement of knowledge along supply chain and inintra-organizational environment, and of the importance of innovation and MC capability since they areessential carriers for BP enhancement.
【Key words】Absorptive capacity, Innovation, Business performance, Mass customization capability