Enriching Absorptive Capacity Through Social Interaction

Absorptive capacity is frequently highlighted as a key determinant of knowledge transfer within MNEs. But how individual behaviour translates to absorptive capacity at the subsidiary level, and exactly how this is contingent on subsidiaries’ social context, remains under-addressed. This not only limits our understanding of the causal linkage between individual and organizational level absorptive capacity, it also hampers further research on potentially relevant managerial and organizational antecedents, and limits the implications we can draw for practitioners in the field seeking to increase their organization’s capacity to put new knowledge to use. To address this shortcoming we conduct an in-depth comparative case study of a headquarters-initiated knowledge transfer initiative at two subsidiaries of the same MNE. The findings demonstrate that social interaction is a key requirement for subsidiary absorptive capacity as it enables employees to participate in the transformation of new knowledge to the local context. Second, the findings illustrate how organizational conditions at the subsidiary level can impact subsidiary absorptive capacity by enabling or constraining local interaction patterns. These insights contribute to the absorptive capacity literature by demonstrating the scale and scope of social interaction as the key link between individual- and organizational-level absorptive capacity.