The performance effect of two different dimensions of absorptive capacity and moderating role of holding-cash

ABSTRACT

This study identified two different dimensions of absorptive capacity and examined the relationship between absorptive capacity and a firm’s financial performance. Further, we measured absorptive capacity using both the inputs and outputs involved in its development simultaneously, and investigated the complementary role of holding-cash in the performance effect of two dimensions of absorptive capacity. Our results showed that a firm’s homogeneous absorptive capacity has a positive effect on its short-term performance, while a firm’s heterogeneous absorptive capacity may hinder its short-term business performance. However, a high level of either homogeneous or heterogeneous absorptive capacity is not always useful to a firm’s long-term financial performance. Finally, cash, as a slack resource, was found to be more useful for the performance effect of heterogeneous absorptive capacity than for that of homogeneous absorptive capacity in the short term.

KEYWORDS:

• Absorptive capacity
• cognitive schema
• organisational slack
• financial performance

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Jeong-Duk Choi is a senior consultant at LG Economic Research Institute (LGERI). He received his PhD in management engineering from Korea Advanced Institute of Science and Technology (KAIST).

Ji-Hoon Park is a PhD candidate in College of Business, Korea Advanced Institute of Science and Technology (KAIST).

ORCID

Jeong-Duk Choi http://orcid.org/0000-0002-1823-0088

Ji-Hoon Park http://orcid.org/0000-0001-7075-8114