Demystifying the role of absorptive capacity in achieving innovation-based performance: model development and empirical validation

Purpose The purpose of this study is to explicate the relationship between knowledge-based dynamic capacities (KBDC) and innovation-based performance (INPF) in information technology (IT) firms in India by examining the mediating impact of absorptive capacity (ABCP). The paper aims to determine whether and how the ABCP of the firms is recognized as the essential facilitator of INPF. Design/methodology/approach A survey of 511 respondents from Indian IT employees at the upper and middle management levels was undertaken. In this study, the partial least squares (PLS) technique explored the causal links between constructs with the use of the software application SMART-PLS 3.0. Findings The outcomes of this study proved the existence of a statistically significant relationship between the ABCP and INPF of information technology firms. Furthermore, ABCP's influence as a mediator between KBDC and INPF is significant. Therefore, findings imply that ABCP mediates the relationship between KBDC and INPF, however, only to some extent. Research limitations/implications With the dynamism of the global market, the research has made significant gains in illustrating the criticality of ABCP for strengthening its KBDC in a much-needed Indian context. Therefore, following the recommendations and findings of this study, practitioners should concentrate on strengthening both ABCP and KBDCs to improve their INPF. To do this, managers must proactively organize their resources, procedures, and structure to promote knowledge absorption and dissemination, fostering innovation. Originality/value It is a ground-breaking study that proposes that the ABCP plays a crucial role in enhancing the INPF of the firms. The software industry will likely benefit from this study by understanding ABCP's potential impact on its INPF and designing knowledge management methods accordingly.