This working paper sets up the basis for investigating the role of IT capabilities in the context of large and distributed service organizations. The idea grounded in this article resides in the possibility that absorptive capacity has an impact on service innovation. Addressing some theories on absorptive capacity and on service innovation we provide a brief insight on the importance that IT skills and capabilities can have on service innovation in large organization which are widespread distributed in different geographical location.
The growing intensity and dynamism of competition across product markets has had
profound implications for the evolution of strategic management. Increasing
turbulence of the external business environment has focused attention upon the
importance of learning fast how to behave within the markets and react to reach good
performances
In order to clarify the relationship between knowledge and firm
performance/innovation, the concept of absorptive capacity has been introduced by
Open innovation refers to the environments in which multiple actors (both public
and private) collaborate in delivering innovative services, each contributing with its
own resources and capabilities, and where the underlying business models are
attractive to all of the participants involved
In this context, information technology (IT) has been widely recognized as one of
the firm capabilities which have a potential impact on the development of new
products, services and the associated business processes
In this working paper we address this topic by providing the theoretical basis for a further analysis of innovation processes in cooperative service environments. It lies on the constructs of absorptive capacity. In particular, the following research questions have been addressed: 1) to which extent absorptive capacity constructs apply to the service and open innovation contexts? 2) how do they relate to IT capabilities?
The paper is organized as follows. A theoretical background section will introduce the underpinning theories and concepts applied to a traditional organization. Then, a discussion session will briefly present the proposed framework. 2
The capability to learn is very important for an organization. The process through
which it is achieved has been widely investigated in the management literature. This
process has been divided into four main steps
Information interpretation has been defined as “the process of translating events
and developing shared understandings and conceptual schemes”
These concepts move to the idea that, due to the amount and the scale of information, there is no organizational learning when organizations tackle too many information.
The research of Levitt and March on the problem of interpretation of past
experiences states that it is a process based on a small number of observations in a
complex, changing organization. The events that happen are not always obvious, and
the causality of events is difficult to untangle, the difference between success and
failure of a given action is not always clear
The main problem with the learning theories described above is linked with the limit faced by an organization for allowing knowledge to flow inside the organization itself. Absorptive capacity is a limit to the rate of information that a firm can absorb.
Absorptive Capacity In Service Innovation: the Role of IT Capabilities
The seminal article on absorptive capacity highlights the idea that the capacity of an
organization to absorb external knowledge (recognize, evaluate, assimilate and apply)
is a function of the level of prior related knowledge
Other researches point out the different perspective that absorptive capacity (AC)
has on potential and realized absorptive capacity. They highlight that while the ability
to value and acquire external knowledge is a potential AC, the organization cannot
gain positive outcome if this potential AC is not supported by realized AC which is a
function of leveraging absorbed knowledge
The use of these concepts has been useful for understanding the possibility to
move the absorptive capacity from the R&D department
Previous research on the sources of innovation has demonstrated that organizational
innovation results from borrowing rather than invention. Indeed, the ability to exploit
external knowledge is a critical component of innovative capabilities. Furthermore,
information originating from other internal units in the firm, outside the formal
innovating unit (i.e., the R&D lab), such as marketing and manufacturing, has also
received attention in the product industry
In large service organizations (i.e. banks) which are widespread distributed within different geographical environments and where subsidiaries encounter different customer needs and a variety of possible partners, the role of local managers and of integration mechanisms become crucial. In fact, on the one hand local managers represent the gatekeepers which can support organizations in the definition of competitive strategies and in the development of new services. They have the possibility to acquire, assimilate, transform and exploit knowledge in order to achieve organizational innovation. Thus, local managers should possess a set of skills allowing them to recognize the potential value of a business idea and to communicate it to other organizational units. On the other hand, integration mechanisms (i.e. specialized actors, supporting tools) are needed in order to enable the transfer of knowledge from local managers to the organizational units in charge of implementing new services.
Therefore, the effectiveness of the overall innovation process lies on both the quality of the interpretation that managers perform on the environmental needs and opportunities (potential absorptive capacity) and the effectiveness of the integration mechanisms which exploit the service innovation (realized absorptive capacity).
When services are heavily supported by IT, interoperability represents a prerequisite of open innovation environments and the above mentioned “prior related knowledge” must necessarily refer also to IT skills and capabilities.
As a result of this conceptual analysis on the applicability of absorptive capacity concepts to a cooperative service environment, the following research questions arise: 1) which type of IT skills and capabilities (prior related knowledge) positively affect the potential absorptive capacity of local managers? 2) which integration mechanisms can be implemented at organizational/inter-organizational level in order to positively affect the realized absorptive capacity and to increase the efficiency of assimilation and transformation?
These research questions should be further empirically investigated in order to gain insights on the role of IT skills and capabilities in the organizational innovation processes. 4