Absorptive capacity in buyer-supplier relationships: empirical evidence of its mediating role

TLDR: In this paper, the authors examined the mediating effect of absorptive capacity (AC) related to innovation and efficiency performance in the context of buyer-supplier relationships and concluded that AC is necessary to achieve sustainable performance improvement.

Abstract: Companies increasingly depend upon the knowledge of supply chain partners to deliver superior value to customers with ever shifting preferences. This transference requires absorptive capacity (AC), which allows an organization to identify external knowledge and convert it into value for the firm. Based on an approach of dynamic capabilities, AC encompasses three related learning processes: exploration, assimilation, and exploitation. Within the particular context of buyer�supplier relationships (BSR), the aim of this research is to examine AC, one of its most relevant antecedents � organizational compatibility � and its outcomes. Two samples of 153 and 199 companies, operating as key suppliers of two focal buyers, a European multinational retail chain and an American multinational spare parts distributor, respectively, constitute the empirical base of the study. Results derived from structural equation modeling and, more precisely, multi-group confirmatory factor analysis and a formal test of mediation, strongly indicate for both samples that AC mediates between organizational compatibility on the one hand and innovation and efficiency performance on the other hand. Results also indicate that the mediating effect of AC related to innovation increases with demand uncertainty. This paper thus suggests that managers must be aware that the selection of supply chain partners based on their compatibility alone is not enough. AC is necessary to achieve sustainable performance improvement.