The Interdependence of Knowledge Absorptive and Disseminative Capacities: An Explanatory Framework

Background: For small- and medium-sized enterprises (SMEs), due to their specific characteristics, knowledge absorption is one of the most important capacities for developing competitive advantages. It is even more critical in knowledge-intensive industries, such as insurance, where the pace of advancements and competition is extremely fast in marketing, new product development, customer attraction, market expansion, and so on. As a result, to increase performance efficiency in each of these domains and in firms’ daily activities, SMEs need to follow a collaborative approach. To close the gap in the existing literature, this study focuses on knowledge absorption in small firms and its interrelationship with disseminative capacity at the intra and inter-organisational level. Methodology: This research employed a qualitative, inductive approach based on the Glaserian version of grounded theory. This included three rounds of data collection and analysis. Initial interviews were conducted with top managers to create a holistic picture of the business environment, followed by another round of interviews with higher number of top managerial level employees. The goal at this stage was to identify the main challenges that small firms face in absorbing knowledge from external sources, as well as the associated knowledge capacities that would help them tackle these challenges. The third stage was centred around a focus group with some of the previous interviewees and two external industry experts in order to refine and finalise the knowledge capacities. This ultimately resulted in the formation of four subsets or dimensions of absorptive capacity at the intended levels. Findings: This research proposes an integrated and comprehensive framework for knowledge absorption and dissemination, consisting of four dimensions: discovering new knowledge, converting the newly acquired knowledge, applying the converted knowledge, and distributing knowledge. The main processes identified include seven distinguishable activities: extracting knowledge needs, looking for external knowledge, understanding external knowledge, converting to useful knowledge, sharing information and knowledge, improving performance by new knowledge, and distributing knowledge. In addition, the pre-requisites for development of the aforementioned activities and capacities were identified as openness to the environment, sharing vision and goals, updating IT infrastructures, giving up the inefficient routines and information, development of an appropriate appraisal system, and managing the organisational paradigm. Conclusion: The findings promote a clear conceptualisation of an interrelated framework based on validated and well-explored constructs. Unlike previous models which consider knowledge absorption and knowledge dissemination as distinct capacities, the explanatory framework presents them as inseparable and concurrent. In simple terms, the research model highlights that knowledge absorption is not properly conducted if the firm fails to disseminate its existing knowledge on the inter-firm level