What do we do now? The Role of Absorptive Capacity and Consulting Service Firms in the Internalization of New Knowledge Within Organizations

• Main Author: Nair, Sudhir
• Format: Others
• Published: ScholarWorks@UMass Amherst 2011
• Subjects: Absorptive capacity; Consulting service firms; New knowledge; Organizational routines; Business
• Online Access: https://scholarworks.umass.edu/open_access_dissertations/478; https://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1477&context=open_access_dissertations

The impact of knowledge on firm performance has been seen as one explanation of firm performance heterogeneity, which is a central question in the area of Strategic Management. However, there has been surprisingly limited research into the role of new knowledge internalization within firms. Further, the ubiquitous role of external knowledge providers, especially those that explicitly exist to provide knowledge to firms (Consulting Service Firms) has been negligibly studied. Specifically this dissertation looked at how firms first understand new knowledge and suggested that firms differ in their ability to discern the impact of this new knowledge based on the absorptive capacity that they already possess. I examine how firms internalize this new knowledge and suggest that they can either use existing internal resources or seek external assistance to achieve this internalization. This dissertation has empirically examined these linkages. A survey sent to the top management of 2015 Indian firms, yielded 277 usable responses, which have provided insights into the new knowledge internalization pathways in firms. I use structural equation modeling and hierarchical regressions to test my hypotheses. I find that firms do differ in their use of internal and external knowledge providers, while attempting to internalize new knowledge and that the quality of the relationship impacts the outcomes of any external engagement. I also find that firms with absorptive capacity benefit both by having better short term financial performance and also by being well situated to increase their stocks of knowledge assets, which can help long term performance. This dissertation contributes to several streams of literature in the field of strategic management. I add to the knowledge based view literature and more specifically to the absorptive capacity literature by partially opening the black box of organizational routines. This dissertation also contributes to the professional service literature by suggesting that consultants can help firms generate performance, although this is particularly beneficial to firms that already posses high absorptive capacity. Implications of the results from both practice and research perspectives are discussed and areas of future research are suggested.