ABSORBING INTEGRATION: EMPIRICAL EVIDENCE ON THE MEDIATING ROLE OF ABSORPTIVE CAPACITY BETWEEN FUNCTIONAL-/CROSS-FUNCTIONAL INTEGRATION AND INNOVATION PERFORMANCE

Abstract

Integration of organisational units has been extensively researched in various streams of management and organization sciences. It is very important whenever knowledge differences have to be overcome due to functional departmentalisation and the ensuing knowledge specialisation. However, extant literature does not yet appreciate the mediating role of absorptive capacity (AC) in this context. We argue that departments use integration mechanisms in order to develop and maintain such an organisational capability to absorb knowledge from other departments, so that integration can succeed to increase innovation performance. Our unique dataset of Italian manufacturing firms from various industries allows us to study this in the context of the integration of research and development (R&D) and marketing and sales (M&S) departments. Thereby, we provide empirical evidence on the mediating role of AC. We find evidence that R&D departments build AC via formal cross-functional integration, while M&S departments do so through informal integration. Moreover, we provide evidence of AC's mediating role for the relationship between cross-functional integration mechanisms and innovation performance. Our findings also reveal significant differences between R&D and M&S functions in terms of effect sizes and significance levels. AC of R&D departments has a significant and substantial effect on innovation performance and thus effectively acts as a mediating variable, while in case of M&S departments we observe a significant direct effect between formal cross-functional integration and innovation performance without any mediation by AC.