Building competitive advantage: how organizational culture shapes absorptive capacity through knowledge sharing

PurposeThe strict regulations and reporting requirements in microfinance institutions require a high level of knowledge and expertise in finance, accounting and risk management. Therefore, microfinance institutions (MFIs) must possess a high absorptive capacity to understand their customers' needs and develop appropriate products and services to meet them. This study explains how organizational culture influences absorptive capacity in MFIs, with a particular focus on the mediating role of knowledge sharing.Design/methodology/approachData were collected from 450 randomly selected employees of microfinance banking institutions in Pakistan. The data were tested for reliability and validity, and hypotheses were tested through structural equation modeling in WarpPLS 8.0.FindingsThe findings show that knowledge! sharing mediates the relationship between organizational culture and absorptive capacity. Thus, MFIs should promote knowledge sharing as a cultural value to improve their ability to acquire and utilize new knowledge, enhance absorptive capacity to drive innovation and facilitate the development of new products and services.Practical implicationsMFIs with higher absorptive capacity are more likely to be able to respond to changes in the market, such as new technologies or shifting customer demands. Therefore, managers should promote a culture of sharing knowledge and expertise to ensure adaptability in dynamic market conditions.Originality/valueThis research provides a framework for organizations to better understand the role of knowledge sharing in their success and how to leverage it to enhance their absorptive capacity. It is valuable for academics and practitioners seeking to improve organizational performance and competitiveness.