THE NEXUS BETWEEN BUSINESS INCUBATORS AND ORGANIZATIONAL INNOVATION: DOES ABSORPTIVE CAPACITY MODERATE?

Abstract

This paper involves the discussion of the impact of business incubators on commercialization and innovation among the startups in Pakistan, with special attention to the moderating effect of absorptive capacity. It is based on the Resource Based View that the research examines the potential of incubator provided services in increasing firms capacities to obtain, assimilate, transform, and utilize knowledge to maximize the innovation and commercial performance. A quantitative research design was utilized and 141 respondents completed a structured questionnaire of 51 public and private incubators were used to collect data. To test the proposed relationships, the statistical analyses, such as descriptive statistics, Pearson correlation, confirmatory factor analysis, and structural equation modeling, were conducted. The findings show that the business incubators affect both the absorptive capacity and commercialization and innovation greatly in a positive manner. Although the absorptive capacity has positive relationship with commercialization and innovation, it did not support its mediating role in the structural model. These results indicate that incubators have an overwhelming direct effect on startup market and innovation performance, and the conversion of improved absorptive capacity to quantifiable commercialization performance might demand supplementary organizational or contextual environments. The research paper adds to the scanty empirical evidence on incubation in developing economies and provides viable implications on incubator managers and policy makers that aim at enhancing startup support systems. It is recommended that future studies take the longitudinal designs and investigate other mediators to understand the mechanisms behind the production of knowledge based performance gains.