Knowledge-processing capabilities and innovative performance: an empirical study

Purpose - Knowledge-based assets and organizational learning capabilities are recognized to be critical for firm's innovation activities. The process of creating new knowledge requires acquiring useful data and information, and utilizing it effectively in its internal innovation activities. To manage external knowledge, firms need absorptive capacity. The purpose of this study is to present the concept of the firm's absorptive capacity as a multidimensional, dynamic construct consisting of capabilities for organizational knowledge processing. Design/methodology/approach - The paper draws on results from a large-scale survey. The empirical data used in the study comprises of 217 Finnish firms from seven different industry sectors. The hypotheses were tested by means of hierarchical linear regression analysis. Findings - The results of the empirical tests give some support to the view that it is not only the firm's knowledge stock but also its knowledge flows that are crucial for sustaining innovative performance. The regression estimation shows that knowledge-utilization capabilities were reflected in the firm's innovative performance. Research limitations/implications - As the data used in the study was cross-sectional, the causal relationships and the sustainability of innovative performance cannot be captured. Avenues for further research include the interaction between the firm's knowledge base, knowledge processes and innovativeness. Practical implications - This study emphasizes the importance of the firm's ability to utilize and renew its knowledge base effectively. In order to utilize externally generated knowledge, firms need an ability to internalize it and then combine the information and new insights with the existing knowledge base. Originality/value - As only little empirical research has been conducted on the impact of knowledge-processing capabilities on the firm's innovative performance, the empirical evidence reported here makes a valuable contribution in this highly important area.