The role of absorptive capacity in Chinese firms

Purpose – This study aims to advance and test a multi-dimensional operationalization of absorptive capacity (ACAP) to ascertain its mediating role in the transformation of R&D expenses in actual performance. Design/methodology/approach – This study departs from the conceptualization of ACAP as a reflective higher-order R&D-based construct, by specifying ACAP into its components and using an operationalization that encompasses both R&D and non-R&D measures to perform mediation analysis on a sample of 1,096 Chinese mainland firms. Findings – This study’s findings report evidence of positive but different roles of the components of ACAP, with specific reference to the positive but partial mediating role of realized ACAP between both R&D expenses and potential ACAP on a firm’s performance. Relevant research and practical implications for both management and policymaking are discussed. Originality/value – The approach to ACAP conceptualization and measurement taken in this study provides empirical support to an often assumed and, incidentally, under-explored relationship. Moreover, it contributes with a multi-dimensional, non-exclusively R&D-based and process-oriented perspective to the analysis of the role played by ACAP in Chinese firms’ R&D effectiveness. Keywords China, Performance, Mediation, R&D, Potential absorptive capacity, Realized absorptive capacit