Revisiting knowledge management for innovation: the role of absorptive capacity and social processes

Abstract

Integrating absorptive capacity and social processes inside a knowledge-based view (KBV) framework, this research aims to investigate how knowledge management systems help to define firm innovation performance. More precisely, it tackles the theoretical disconnect regarding how ideas turn into invention results. A quantitative, cross-sectional research design was employed using survey data collected from 763 employees working in small and medium-sized automobile manufacturing firms in Pakistan. Data were gathered from key informants including project managers, engineers, supervisors and team leaders. Structural equation modeling was applied to test the proposed mediation and moderation relationships among knowledge management processes, absorptive capacity, social processes and firm innovative performance. The results show that knowledge management processes significantly enhance firm innovative performance, while absorptive capacity mediates this relationship. Social processes significantly moderate the relationship between knowledge management processes and absorptive capacity, but do not significantly moderate the direct relationship between knowledge management processes and firm innovative performance. This study extends the KBV by empirically demonstrating that the innovation value of knowledge management processes is realized through absorptive capacity and enhanced by social processes. It offers a capability-based and socially grounded explanation of innovation in knowledge-intensive manufacturing firms. Managers in automobile manufacturing firms should prioritize knowledge application, develop absorptive capacity and foster supportive social processes to translate knowledge investments into sustained innovation. This study provides novel empirical evidence from an emerging economy, integrating knowledge management processes, absorptive capacity and social processes into a unified framework explaining innovative performance in automobile manufacturing firms.