M.Sc Thesis

M.Sc StudentLev-Ran Galit
SubjectCompetitive Absorptive Capacity and Superior Performance:
The Impact of Environmental Dynamism and
Organizational Learning Culture
DepartmentDepartment of Industrial Engineering and Management
Supervisors MR Avi Fiegenbaum (Deceased)


Absorptive capacity (ACAP) is defined as the ability of the firm to recognize new external knowledge, assimilate it, and apply it to commercial ends. At present, when the information availability and volume are increasing dramatically, the importance of knowledge management, hence ACAP development, is crucial for the firm’s success.

We extend ACAP’s theory threefold. First, we enhance its construct and measurements focusing on the competitive content by introducing Competitive ACAP. Competitive ACAP addresses knowledge pertaining to the entire competitive space (rather than just technical information) and is developed by the use of structured processes. Second, considering both short and long term performance, we show that Competitive ACAP leads to superior performance - especially in dynamic industries. We show that in environments characterized by high dynamism, more developed ACAP contributes to the firm’s short and long term performance. As the environmental dynamism decreases, ACAP’s positive contribution decreases as well. Third, our findings suggest a combined effect of environmental dynamism and learning organizational culture on the development of Competitive ACAP. Operating in a dynamic environment is not sufficient to promote Competitive ACAP development by a firm - we show that ACAP will be developed only in the presence of an organizational culture that values learning.

A sample of 610 employees and managers, representing 71 Israeli companies from varied industries, provides the empirical support for the above relations.