Strategic orientations, firm performance and the moderating effect of absorptive capacity

The purpose of this article is to study the moderating effect of absorptive capacity, defined as the set of organizational routines and processes through which companies acquire, assimilate, transform and exploit knowledge to produce a dynamic organizational capacity (Zahra and George, 2002), in three strategic orientations: market orientation; technology orientation and entrepreneurial orientation and their positive relationship in the performance of the medium and large Mexican manufacturing firms. Likewise, it is determined whether these three combined SOs influence firm performance.

The data was collected from 171 medium and large-sized Mexican manufacturing firms. The proposed hypotheses are tested using partial least square structural equation modeling (PLS-SEM).

Despite the importance of knowledge for the development of firms, the results indicate that the moderating effect of absorptive capacity is only present in the relationship between entrepreneurial orientation and firm performance. That is, firms cannot take advantage of knowledge simultaneously between the three strategic orientations. For their part, market orientation and entrepreneurial orientation exert a positive influence on firm performance.

The main practical implication for the manufacturing industry is that they must develop mechanisms to detect what kind of knowledge affects each strategic orientation, in this way it can make the absorptive capacity influence the relationships between SO and FP.

The main contribution consists of studying the moderating effect of the absorptive capacity on the relationship between three strategic orientations and firm performance, and not concentrating solely on the simultaneous use of these strategies as is commonly done.