WHICH ABSORPTIVE CAPACITY DIMENSION MATTERS MOST? AN IMPORTANCE-PERFORMANCE ANALYSIS OF INNOVATION CAPABILITY AMONG AGRICULTURAL RESEARCHERS IN MALAYSIA

Abstract

Most empirical work on absorptive capacity (ACAP) and innovation simply asks whether a relationship is statistically significant. This leaves open the question of which ACAP dimension an organization should invest in first, and whether any dimension is a strict requirement rather than a mere helpful driver of innovation capability. Using a dataset of 118 Malaysian agricultural, this study considers all four dimensions of absorptive capacity (acquisition, assimilation, transformation and exploitation) as first order direct predictors of innovation capability. A disjoint two-stage partial least squares structural equation modeling (PLS-SEM) approach was used, where all four hypothesized paths were statistically significant (knowledge acquisition, β = 0.174, p =.027; assimilation, β = 0.256, p = .008; transformation, β = 0.211, p = .019; exploitation, β = 0.269, p =.006), explaining 61.7% of the variance of innovation capability together. Furthermore, the analysis was extended with an importance-performance map analysis (IPMA) and a necessary condition analysis (NCA) to go beyond significance to prioritization and necessity. All four dimensions were also statistically significant necessary conditions (permutation test, all p ≤ .001). The largest necessity effect was for exploitation (d = 0.289) and the smallest, but significant, necessity effect was for acquisition (d = 0.126). The clear priority target for institutional investment was the assimilation of knowledge, with the second highest importance score (0.467) and the lowest performance score (54.39) in the IPMA. The NCA results confirm this finding, showing an overall inefficiency of 54.3% in the outcomes related to knowledge assimilation. By contrast, exploitation combined the highest importance, performance and necessity scores, and thus represented a maintained strength. These findings are discussed in relation to recent microfoundations of absorptive capacity research, and Malaysia’s evolving agricultural R&D policy context, with item-level practical recommendations offered for research-institution management.