Revisiting the Absorptive Capacity–Firm Performance Nexus: An Integrative Review and Future Research Direction

Organizations increasingly operate within digitally interconnected, knowledge-intensive ecosystems characterized by technological disruption, institutional volatility, and intense competition. In such environments, sustainable firm performance depends less on the ownership of static resources and more on the ability to acquire, assimilate, transform, and exploit knowledge in real time. Absorptive capacity has therefore emerged as a critical dynamic capability enabling firms to identify valuable external knowledge, internalize it through organizational learning processes, and strategically deploy it to enhance competitiveness. Despite its prominence, empirical findings on the relationship between absorptive capacity and firm performance remain mixed and inconclusive. This study reviews existing conceptual, theoretical, and empirical literature to identify key knowledge gaps and inform future research. Specifically, it disentangles the dimensions of absorptive capacity—knowledge acquisition, assimilation, transformation, and exploitation—to examine how they individually and collectively influence firm performance. Drawing on organizational learning theory and balanced scorecard theory, the study synthesizes prior evidence to explain how firms convert external knowledge into sustained performance outcomes. The review indicates that absorptive capacity enhances performance through improved learning, innovation capability, strategic adaptation, and operational efficiency. Notably, realized absorptive capacity dimensions (transformation and exploitation) exhibit a more direct relationship with firm performance than potential absorptive capacity (acquisition and assimilation). The study proposes a conceptual model linking absorptive capacity dimensions to firm performance and outlines directions for future research. It contributes to the strategic management literature by advancing a capability–performance perspective that emphasizes knowledge utilization processes over resource possession, particularly in dynamic and turbulent environments.