Absorptive capacity in startups: A systematic literature review.

• Author: Chaparro, Ximena Alejandro Flechas

INTRODUCTION

Absorptive capacity (AC) is defined by Cohen and Levinthal (1990) as the ability to recognize, identify, assimilate and exploit new external information, and is considered to be critical for the innovation process. Zahra and George (2002, p. 186) defined AC as a "set of organizational routines and processes" including acquisition (to identify and obtain external knowledge), assimilation (to interpret and understand the information obtained), transformation (to integrate and combine existent knowledge with the newly acquired), and exploitation (the application of new knowledge for commercial ends). This ability involves renewing routines, practices, technological paths (March, 1991; McGrath, 2001), but in particular, it involves a learning process (Lane, Koka, & Pathak, 2006).

Previous works have addressed extensively how organizations might benefit from AC. For instance, Patterson and Ambrosini (2015) explored how AC could be configured to support research activities in biopharmaceutical firms, Engelen and colleagues (2014) identified how AC contributes to the strengthening of the entrepreneurial orientation and a firm's performance relationship, and Lis and Sudolska (2015) studied what role AC plays in organizational growth and competitive advantage. The large number of theoretical and empirical publications addressing the AC construct over the past 30 years has also led to a number of literature reviews with different aims, such as revalidating and reconceptualizing the construct (e.g., Lane et al., 2006; Zahra & George, 2002), identifying major discrepancies among AC's theoretical perspectives (e.g., Volberda, Foss, & Lyles, 2010), and analyzing the multifaceted dimensions of AC literature (e.g., Apriliyanti & Alon, 2017).

However, unlike these past reviews, in the present study, we propose to analyze AC in the context of new ventures, mainly due to two factors. First, because several authors have argued that startups are better suited to develop radical innovation (Bower & Christensen, 1995; Edison, Sm0rsgard, Wang, & Abrahamsson, 2018; Spencer & Kirchhoff, 2006). According to Giardino et al. (2014, p. 28), startups are entities "exploring new business opportunities, working to solve a problem where the solution is not well known and the market is highly volatile." These organizations are characterized by a lack of resources, rapid evolution, small teams, little working experience, third-party dependency, and work under several uncertainties (Giardino et al., 2014). Despite the shortcomings associated with the scarcity of resources and experience (Ambos & Birkinshaw, 2010), these firms are able to launch innovative products and become a 'game-changer' in traditional industries, putting incumbent firms under pressure (Edison et al., 2018; Siren, Hakala, Wincent, & Grichnik, 2017). Second, because, despite being game-changers, startups operating in technology-intensive industries suffer the permanent threat of premature obsolescence since -and considering the high level of uncertainty- these companies often bet on 'failed technologies' (i.e., those technologies that result not to be the ones adopted by the market (Eggers, 2012) and to survive, they must revamp their knowledge to adjust their solutions for which the AC may be crucial. Therefore, we identified a necessity to analyze AC literature within the context of new ventures in order to better understand which topics have been studied in this regard, and try to identify which aspects can be extracted from the main findings to contribute to some extent to the improvement of entrepreneurs' processes of knowledge renewal and innovation.

The aim of our research is to determine how the concept of AC has been addressed in the new venture context by identifying the clusters of research, the main authors, and findings. To this end, we proceeded to conduct a systematic literature review analyzing 220 papers published between 2001 and 2018. Three clusters of research regarding the importance of AC in the new venture context were identified: Knowledge, Innovation, and Performance. In addition, the central authors of the discussion were reviewed, including their main contributions, theoretical references, and future research agenda.

The text is structured as follows: section 2 reviews the concepts and discussions about dynamic capabilities and new ventures, followed by the methodology in section 3. Our results are presented in section 4, including the bibliometric and content analyses. In section 5, we discuss the findings, and the last section contains the conclusions and suggestions for future research.

LITERATURE BACKGROUND

Authors such as Zahra and George (2002) and Engelen et al. (2014) have recognized AC as a dynamic capability. Dynamic capabilities (DC) enable the firm to evolve and positively influence its competitive advantage (Zahra & George, 2002, p. 185). Given that the present study seeks to connect concepts from the strategic management (i.e., AC and DC) and entrepreneurship fields, it is important to discuss in which way this interaction could be addressed considering the still ongoing debate about these concerns (Arend, 2014). Teece, Pisano, and Shuen (1997, p. 516) defined DC as "the firm's ability to integrate, build and reconfigure internal and external competences to address rapidly changing environments." DC is tied to the resource-based theory, in which firms' differences, such as resources, skills or endowments, are key aspects that help companies to create a sustainable competitive advantage (Barney, 1991). However, DC complements the resource-based theory by providing the abilities for controlling, configuring, and reconfiguring the resources for long-term survival.

According to Teece et al. (1997), resources and assets are arranged in integrated groups of individuals that perform the firms' activities or routines. In other words, through functions, routines, and competences, firms take advantage of their resources. However, differently from incumbent firms, new ventures lack functions and routines, so they need to rely broadly on team members' and entrepreneurs' idiosyncratic knowledge to operate (Bergh, Thorgren, & Wincent, 2011). In this regard, literature offers some examples of how DC has been addressed focused on individuals. For instance, Teece (2012) points out that there is a group of DC that is based on the individual "skills and knowledge of one or a few executives rather than on organizational routines" (Teece, 2012, p.1). According to the author, capabilities are built jointly by individual skills and collective learning originating from employees working together. In addition, the author notes that entrepreneurial management, besides being concerned about the improvement of existent routines, is more about creating new ones and figuring out new opportunities. Finally, Teece mentioned that the dependency on individual skills usually fades over time after five or ten years.

The individual approach in DC is associated with the concept of microfoundations, which are one of the aspects that undergird the capabilities. According to Teece (2007, p. 1319), micro-foundations are the mechanisms through which sensing, seizing, and reconfiguring capacities operate; these include "the distinct skills, processes, procedures, organizational structures, decision rules, and disciplines." Certainly, all these mechanisms widely depend on individual cognition (Helfat & Peteraf, 2015) and individuals' extant knowledge (Teece, 2007). Helfat and Peteraf (2015) suggest that individual cognitive capabilities may mediate the relationship between changes in the organizational environment and strategic changes, and, therefore, individuals (by the effect of their own capacities) can reshape their organizations.

Several scholars have also discussed DC from the entrepreneurship perspective (for instance, Arend, 2014; Arthurs & Busenitz, 2006; Boccardelli & Magnusson, 2006; Newbert, 2005; Zahra, Sapienza, & Davidsson, 2006). These works offer different alternatives to connect both of the research strands (i.e., DC and entrepreneurship). For instance, Newbert (2005) proposes the new firm formation process as a dynamic capability, based on a random sample of 817 entrepreneurs; he concludes that there is evidence to support that new firm creation meets the DC conditions placed by Eisenhardt and Martin (2000) (i.e., identifiable, unique, deals with market dynamism, and is affected by learning). Arthurs and Busenitz (2006) set out that after the opportunity identification, when entrepreneurial leadership starts to transition to a more formal type of management, new ventures need to develop new skills -as mentioned by Teece (2012)- through the usage of DC. Furthermore, Arend (2014) found out that most entrepreneurial ventures have been created based on DC from the beginning, and mainly on an individual level.

RESEARCH METHODS

With the aim of determining how the concept of AC has been addressed in the startups' context, we conducted a systematic literature review (SLR). This methodology is a rigorous and well-defined approach that enables the identification of the current knowledge and what is known about a given topic (Boell & Cecez-Kecmanovic, 2015). Following Denyer and Neely (2004), we endeavored to develop an accurate process considering the planning, the use of explicit and reproducible selection criteria, and an analysis procedure. Figure 1 summarizes our systematic review process.

Planning the SLR

During the planning phase, we determined the purposes of the research and its most important aspects. Our main goal was to identify how past research employed AC in an entrepreneurship and startups context. We did not limit the research to any specific time frame and only peer-reviewed articles were included. We conducted a search in September 2018 on the Web of Science (WOS, Clarivate Analytics) database since it is one of the most...