Absorptive capacity as a determinant of innovation in SMEs: A study of Bengaluru high-tech manufacturing cluster

ABSTRACT

It is generally known that clusters are the sources of innovation and therefore, of late, the focus of researchers has been increasing to unearth the factors driving innovation among the SMEs in a cluster. Researchers have identified the absorptive capacity, which is a measure of dynamic capability of an SME, as one of the critical factors that determine the innovation propensity of an SME. However, due to a lack of consensus among researchers about the factors determining the absorptive capacity of a firm in general and SMEs specifically, quantifying the absorptive capacity has remained a challenge. Within the context of a Bengaluru cluster which houses a densely interconnected network of high-tech manufacturing SMEs, this paper attempts to quantify the absorptive capacity of a firm taking into account both internal/firm-level and external/industry-level factors. Subsequently, this paper probes the impact of the absorptive capacity of an SME on the innovation performance of an SME.

KEYWORDS:

• Absorptive capacity
• innovation
• SMEs
• manufacturing
• cluster
• Bengaluru

Acknowledgement

Authors would like to acknowledge and thank Mr. M N Vidyashankar (President, IESA), Mr. Srinath B R (Senior VP, Marketing & Sales, Micro Labs Ltd.), Mr. P J Mohanram (Senior Advisor, IMTMA), and Mr. H K Shivaram (Director, Prok Devices Pvt. Ltd.) for their timely assistance to carryout the data collection process for this study.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Deepak Chandrashekar is a Senior Research Scholar in the Department of Management Studies at Indian Institute of Science (IISc), Bengaluru, India. His Industrial Economics research work involves study of the role of Absorptive Capacity, Intra-cluster and Extra-cluster Interactions and Innovations in Firm Performance in the High-tech Manufacturing Cluster of Bengaluru. He received his bachelors in engineering from Sri Jayachamarajendra College of Engineering (SJCE), Mysuru in 2012, and MBA/PGDM with specialization in Finance and Systems from SDM Institute for Management Development (SDM IMD), Mysuru in 2014. He was also an International Exchange Student, in 2013 at SHU MBA, Shanghai University, Shanghai, China, and in 2016 at Toyohashi University of Technology, Aichi, Japan.

Mungila Hillemane Bala Subrahmanya is a Professor of Economics in the Department of Management Studies at the Indian Institute of Science (IISc), Bengaluru, India. He joined Indian Institute of Science, Bengaluru as an Assistant Professor in 1996, was promoted to Associate Professor in 2002, and further to a Professor in 2008. He has more than 27 years of professional experience, of which more than 21 years are at the IISc. During his professional career, he received a Commonwealth Fellowship (1999–2000), a Japan Foundation Fellowship (2004/2005), and a Fulbright-Nehru Senior Research Fellowship (2009/2010). He holds a PhD in Economics from the Institute for Social & Economic Change (ISEC) in Bengaluru, and his field of specialization is Industrial Economics.