Exploring the Relationship between Innovative Capability and Competitive Advantage: A Perspective from Dynamic Capability Theory with a Focus on Absorptive Capability

Abstract

This study investigates the interplay between innovative capability and competitive advantage within organizations, leveraging dynamic capability theory and emphasizing the role of absorptive capability. Drawing upon the dynamic capability perspective, which emphasizes the ability of firms to sense, seize, and reconfigure resources in response to changing market conditions, this research examines how innovative capability contributes to sustained competitive advantage. Specifically, the study explores the mechanisms through which absorptive capability, the ability to recognize, assimilate, and apply external knowledge, influences the relationship between innovative capability and competitive advantage. Through a comprehensive review of literature, conceptual analysis, and empirical research, the study aims to uncover the key drivers, processes, and outcomes of this relationship. Furthermore, the research examines the moderating effects of factors such as organizational structure, leadership style, and industry dynamics on the linkages between innovative capability, absorptive capability, and competitive advantage. The findings offer insights for managers, policymakers, and researchers seeking to enhance organizational effectiveness, foster innovation-driven growth, and sustain competitive advantage in dynamic and uncertain environments. By integrating insights from dynamic capability theory and absorptive capability literature, this study contributes to advancing our understanding of the mechanisms underlying organizational innovation and competitive dynamics.