Absorptive capability and its mediating effect on the learning and market orientations' influences on performance

Prior studies have identified that learning orientation and Market Orientation (MO) have positive influences on firm performance. In this paper, the author argues that the firm's absorptive capacity serves as the bridge that facilitates the realisation of such influences. Firms must effectively communicate with stakeholders and disseminate knowledge throughout the firm. Without the capacity of assimilating learned knowledge and exploiting market intelligence, firms cannot fully realise the benefits of learning- or market-oriented corporate strategies. A mail survey was conducted to Canadian manufacturing companies. Using Structural Equation Modelling (SEM), the author tested a theoretical model that specifies absorptive capacity as the mediation variable that links organisational strategic orientations, such as learning orientation and MO, to the performance outcome indicators, such as innovation, customer satisfaction and loyalty, and financial performance. The results indicate that the model fits well with the data; all hypothesised path coefficients are positive and significant.