The Importance of Absorptive Capacity
Absorptive capacity according to Zahra and George (2002) defined as a series of organizational routines and processes by which company acquires, assimilates, transforms and exploit knowledge to produce organizational capabilities that dynamic. Meanwhile, Levinthal (2020) explained that the absorptive capacity namely the ability of a company to recognize new value, external information, assimilate, and apply it to commercial purposes are critical to the ability innovative. Specifically, Zahra and George (2002) explain absorptive capacity reflects one kind from the relationship of individual abilities that can affect the performance of individuals from learning and use of knowledge. Therefore, one's absorptive capacity determined by prior knowledge she or she has. Individuals have formed his own absorptive capacity before they are involved with an activity from sharing knowledge. Between one individual with others will be able to different levels its absorptive capacity, it is between others due to differences in conditions such as professional experience or background behind education. To have a capacity level of absorption of the required knowledge, one needs to know the different types knowledge or topic (aspect of breadth of knowledge), and also need to master with explore a certain type of knowledge (depth of knowledge aspect).
In the theory of absorptive capacity, one's absorptive capacity is the ability to recognize the value new, external information, assimilate, and apply it for commercial purposes is very essential for innovative abilities (Levinthal, 2020). Between one individual with others will be able to different levels its absorptive capacity, it is between others due to differences in conditions such as professional experience or background behind education (Suryaningrum & Silvianita, 2018). Individuals with large absorptive capacity, or with prior knowledge that is more relevant will better able to learn, assimilate and take advantage of the knowledge shared with knowledge sharing process (Saragih et al., 2018).
According to Zahra and George (2002), Absorptive capacity classified into two dimensions, namely: 1) Potential absorptive capacity. Potential absorptive capacity is the ability owned by individuals based on experience, expertise and educational background. So when the employee is placed in a position that does not match the expertise or abilities possessed (potential absorptive capacity) there will be inequality in carrying out their work. The second is Realized absorptive capacity. Realized Absorptive Capacity is realization absorption capacity which consists of the ability transformation which can be defined as the ability of a company to develop and perfect the routine facilitates combining knowledge existing and newly acquired knowledge and assimilated. On the other hand, the absorptive capacity this is also made of exploitability a company that basically is the capacity of a firm to implement newly acquired knowledge products or services that can provide financial gain. It can be concluded that the absorption realization is a function of the transformation ability and exploitation.
Last, Zahra and George's Research (2002) shows a set of indicators that can used to measure absorptive capacity namely: 1) Acquisition (acquisition ability knowledge), namely the intensity of effort and speed companies in identifying and acquire the knowledge necessary for operating activities obtained from the environment external. 2) Assimilation (ability assimilation of knowledge), namely the company's ability to study or study knowledge previously owned, synthesize knowledge, and combine knowledge obtained from external sources. 3) Transformation (transformation ability knowledge), namely the company's ability to develop and improve routines which facilitates merging existing knowledge with knowledge newly acquired. 4) Exploitation (ability to exploitation of knowledge), namely the ability companies to improve, expand, and elevating existing competencies or create a new one by combining knowledge that has been acquired.
The Mediating Role of Knowledge Management
According to North & Kumta (2018), knowledge management must take into account the elements of knowledge sharing, such as participants (employees), contributors, media and availability of people who facilitate knowledge sharing itself. All these elements are integrated by trust between employees, otherwise the knowledge sharing process being carried out by the organization will be hampered (Suryaningrum & Silvianita, 2018). Basically, knowledge creation comes from the individual. Knowledge that contained in the organization is the result of creation of the people in the organization (North & Kumta, 2018).
Knowledge sharing or sharing knowledge is a process where individuals exchange their knowledge and experience (North & Kumta, 2018). Employee Role in knowledge management is undeniable that human resources play an essential role in achieve organizational or company goals. The fact that human resources become the center of attention of the company for directed to achieve human resources betterment. Therefore, the functions of human resource management must synergize with each other (Hasbi et al., 2021).
Knowledge creation is done by designing the framework starting with of data, information, and knowledge previously owned, while the function own organization in knowledge creation is to provide support to individuals in the organization (Andreeva & Kianto, 2011). The creation of knowledge among members of an organization requires the capability to produce new knowledge and explore the potential of new skills and develop new ideas, programs, and the processes for replacing existing knowledge with new knowledge (Mahmoudsalehi et al., 2012; Zhang & Zhang, 2017). While, Andreeva and Kianto (2011) stated that knowledge creation is combined with innovation, which is refers to the results of the successful application of the new knowledge. This ability to collect knowledge of employees, including knowledge work experience, ideas, skills and contextual information are deeply connected with Absorptive Capacity (Pradana et al., 2020) and in the end will influence innovation capability.
The Expected Result of Innovation Capability
Further explained by Levinthal (2020), a person's absorptive capacity is the ability which is not only aimed at obtaining and assimilate but also to use knowledge. There is an assimilation of knowledge that refers to a company routines and processes allows to analyze, process, interpret and understand the information obtained from external sources, making power absorb the potential of the company to receive, acquire, and assimilate external knowledge better, which is called as an innovation capability (Pangarso et al., 2020).
Demir et al. (2021) give an overview that in terms of knowledge sharing behavior consists of two things, namely: knowledge donating and knowledge collecting. Knowledge donating is how one communicates a person's individual intellectual model to the others (Levinthal, 2020). This knowledge donation can also be interpreted as the ability employees to convey knowledge possessed, including work experience, ideas, expertise and contextual information to other employees. Ideally, knowledge management will facilitate obtained knowledge to become capacity to innovate.
Mendoza-Silva (2021) mentioned that innovation capability itself has some dimensions, such as process, product, process, marketing, and organizational. Innovation is a fundamental element through which firms can improve their performance and lead the implementation of new products, services and procedures as a way of delivering business value and securing competitive advantages. Specifically, based on Nawab et al. (2015), knowledge accumulation has a relationship with innovation, since in knowledge accumulation includes storage, obtainment, selection, expansion and establishment of knowledge become the major key in enhancing innovation in an organization. Moreover, knowledge sharing become one of the important activity within organization in enhancing knowledge, innovation and competitive advantage (Nirawati & Prayogo, 2018). At the end, innovation capability also has an influence to performance significantly (Aini et.al., 2013; Nawab et.al., 2015).
From the literature review we discussed before, seven hypotheses forming a synergic path model can be formulated. We visually depict the research framework as figure 1. Afterwards, the seven hypotheses which can be derived from figure 1 are:
- Hypothesis 1: Potential absorptive capacity has positive and significant direct effect on innovation capability.
- Hypothesis 2: Realized absorptive capacity has positive and significant direct effect on innovation capability.
- Hypothesis 3: Potential absorptive capacity has positive and significant direct effect on knowledge management.
- Hypothesis 4: Realized absorptive capacity has positive and significant direct effect on knowledge management.
- Hypothesis 5: Knowledge management has positive and significant direct effect on innovation capability.
- Hypothesis 6: Potential absorptive capacity has positive and significant indirect effect on innovation capability though knowledge management as mediating variable.
- Hypothesis 7: Realized absorptive capacity has positive and significant indirect effect on innovation capability though knowledge management as mediating variable.