Managing market intelligence: The comparative role of absorptive capacity and market orientation

Technological knowledge and market knowledge are among the most valuable resources that a firm can utilize for competitive advantage. Absorptive capacity (ACAP) or a firm's ability to acquire, assimilate, transform, and apply knowledge, has long been a central construct in organizational studies. Yet, limited research exists on ACAP in a marketing context. Marketers tend to utilize market orientation (MO) in similar theoretical contexts. This study extends the scope of ACAP beyond a technology-related context and develops a model to compare the performance of both potential and realized ACAP as well as that of MO to assess shared performance in a market-related context. The survey results suggest that ACAP of market knowledge positively influences firm performance by enhancing customer acquisition & retention of the firm.The findings also indicate that market orientation operates through the innovation process to add its effects to that of ACAP. Finally, this study discusses the moderating role of a firm's balance in cost leadership and differentiation strategy, suggesting comparative and distinguishable effects of ACAP of market knowledge and market orientation.