Abstract
Purpose - This paper assesses the importance of absorptive capacity and organizational memory in the process of internal exploitation for a higher organizational performance, and develops an empirical framework to explain the effect of a firm’s memory and its absorptive capacity on exploitation of internal resources and capabilities to generate incremental innovations and thereby improve firm performance.Design/methodology/approach - Structural equation modeling was used to check the research hypotheses with a sample of 249 Spanish industrial companies.Findings - The results show that organizational absorptive capacity and the firm’s old knowledge positively affect exploitation of existing opportunities. In relation to the interaction between internal exploitation and firm performance, the results show a positive and significant effect. Finally, we found support for the hypothesis that there is a mediator effect of incremental innovation on the relationship between exploitation and organizational performance.Research limitations/implications - Self-reporting by the CEOs may be the most significant limitation since a single key informant provided the data. Although the use of single informants remains the primary research design in most studies, multiple informants would enhance the validity of the research findings. A second limitation is the cross-sectional design of this research that does not allow us to observe the short- and long-term impact of the relationships among the variables. In order to examine the causality of these relationships, future research should use longitudinal studies. Thirdly, we only have subjective performance measures. Complementary studies should also include objective measures of performance. Finally, this study was conducted in a specific national context with manufacturing firms. It is important to note that one should be cautious when generalizing the results to different cultural contexts or sectors. Furthermore, although a sample of firms in a varied set of industries allows for the generalization of the results beyond the idiosyncratic nature of a specific industry, studies involving individual sectors would be useful for validating the results.Practical implications - Competence exploitation has been argued to be less costly, highly rewarding and less risky that other orientation such as competence exploration. One of the main implications for managers is assume both absorptive capacity and organizational memory should be considered in parallel when conducting competence exploitation. Thus it, for companies that adopt a strategy of exploitation, it is important that they strengthen the acquisition of new knowledge and take advantage of old knowledge. In addition, our analysis sheds new light on the importance of incremental innovation in the process of enhancing performance, this innovation facilitates the generation of future incomes. Additionally, researchers may found useful the fact that exploitation and incremental innovations are strongly correlated for assessing the path dependency form another perspective. This, in turn, evokes insights about profiling innovative company based on the degree of newness of innovations they carried out (i.e. radical, incremental) and the strategy they assume (i.e. exploitative, explorative). As exploitation is strongly and positively related with incremental innovations for alter firm performance, exploration (which is considered as a somewhat dichotomy of exploitation (Andriopoulos and Lewis, 2009, March, 1991) may have similar effects on radical innovation (which is seen as an opposite of incremental innovation in terms of characteristics and development-costs). Originality/value - This paper studies some insufficiently investigated relationships concerning important managerial factors. It also presents a new model attempting to participate in the scientific debate about crucial issues such as the factors that can affect the performance generation within the company.