Owners´ prior knowledge and performance: The mediation effect of knowledge absorptive capacity amongst SMEs

This research empirically examines the importance of SMEs having absorptive capacity in order to achieve superior operational performance. Though SMEs are facing with lots of challenges in globalized environment, they have great potential to promote domestic-led growth in the existing industries. Knowledge-based views (KBV) believe that firm´s success is not measured on how firm overcome its scarcity problem but on how firm use its ability to learn and use learning more efficiently than others. This paper focuses on knowledge absorptive capacity and its mediating role between owners´ prior knowledge and operational performance in small medium enterprises. Using data from 170 manufacturing SMEs in Malaysia, research was conducted through self-administered interview with owner or manager of SMEs. The results showed positive and significant relationship between owners´ prior knowledge and operational performance; between owners´ prior knowledge and absorptive capacity; between absorptive capacity and operational performance. Further, results indicated that the absorptive capacity plays a partial mediator role in the relationship between owners´ prior knowledge and operational performance.