External knowledge search strategies toward product innovation performance in Malaysian manufacturing firms

It is commonly accepted that External Knowledge Search (EKS) strategies are important for firms’ Product Innovation Performance (PIP). However, there are two questions that are still not clear. First, what dimensions of firms’ EKS strategies that are crucial in determining their product innovation success? Second, how firms are exploiting the external knowledge from their external knowledge search activities? This study intends to open the “black box” between different dimensions of EKS strategies and PIP by proposing Absorptive Capacity (AC) as the mediating variable. Employing path analysis through Partial-Least Squares- Structural Equation Modelling (PLS-SEM) among a sample of 137 Malaysian manufacturing firms, this study demonstrates that collaboration depth, information search breadth and information search depth are directly related to AC, and indirectly related to PIP. These results suggest that AC mediates the relationship between these three types of EKS strategies and PIP. Interestingly, this study found that AC partially mediates the relationship between collaboration depth and PIP, but fully mediates the relationship between information search breadth and PIP. Although partially mediates, the relationship recorded significant mediation effect between information search depth and PIP. In this way, it provides insights that information search breadth and depth are essential in contributing to firms’ AC development, whereas collaboration depth, albeit contributes to developing firms’ AC, and yet, this strategy could also contribute directly to PIP. This study advances the extant literature by explaining the way of a firm in attaining superior PIP from EKS strategies and AC. Besides that, this study provides insight for managers in developing suitable strategies to gain and sustain competitive advantages. As firms improve in their PIP, it could move up the value chain of a country and encourage a better economic development for the nation.