Managing knowledge for a successful competence exploration

Purpose – This paper seeks to assess the importance of absorptive capacity and organizational memory in the process of internal exploitation for a higher organizational performance, and to develop an empirical framework to explain the effect of a firm's memory and its absorptive capacity on exploitation of internal resources and capabilities to generate incremental innovations and thereby improve firm performance. Design/methodology/approach – Structural equation modeling was used to check the research hypotheses with a sample of 249 Spanish industrial companies. Findings – The results show that organizational absorptive capacity and the firm's old knowledge positively affect exploitation of existing opportunities. In relation to the interaction between internal exploitation and firm performance, the results show a positive and significant effect. Finally, support was found for the hypothesis that there is a mediator effect of incremental innovation on the relationship between exploitation and organizational performance. Research limitations/implications – Self‐reporting by the CEOs may be the most significant limitation since a single key informant provided the data; multiple informants would enhance the validity of the research findings. A second limitation is the cross‐sectional design of the research that does not allow observation of the short‐ and long‐term impact of the relationships among the variables; future research should use longitudinal studies. The study was also conducted in a specific national context with manufacturing firms. Practical implications – Competence exploitation has been argued to be less costly, highly rewarding and less risky that other orientations such as competence exploration. One of the main implications for managers is to assume that both absorptive capacity and organizational memory should be considered in parallel when conducting competence exploitation. The analysis sheds new light on the importance of incremental innovation in the process of enhancing performance. Originality/value – This paper studies some insufficiently investigated relationships concerning important managerial factors. It also presents a new model attempting to participate in the scientific debate about crucial issues such as the factors that can affect performance generation within the company.