Absorptive capacity for market knowledge and knowledge creation outcomes: the case of Thai SMEs

ABSTRACT

Absorptive Capacity (ACAP) helps firms acquire, assimilate, and utilise new knowledge. Drawing on crucial managerial perspectives, this study employs a Partial Least Squares-Structural Equation Model (PLS-SEM) to scrutinise the various dimensions of ACAP (e.g. routines versus extra work, organisational culture, leadership, and the trustworthiness of knowledge sources) concerning market knowledge and knowledge creation outcomes (e.g. knowledge creation activities and firm’s private knowledge) among small and medium enterprises (SMEs) in Thailand. The findings indicate that all dimensions, with the exception of extra work, contribute significantly to the augmentation of firm-specific knowledge. However, only routines and knowledge-oriented leadership demonstrate a positive association with knowledge-creation activities. The results suggested that managers and top executives of SMEs should emphasise non-financial rewards more, create knowledge learning routines, and support the learning culture to enhance the ACAP for market knowledge.

KEYWORDS:

• Absorptive capacity
• market knowledge
• routines
• supportive organisational culture
• knowledge-oriented leadership
• SMEs

1. Introduction

Absorptive Capacity (ACAP), as a knowledge-based dynamic capability (Zahra & George, 2002), plays a vital role in business and management studies, e.g., strategic management, innovations, and knowledge management (Khaksar et al., 2020; Knudsen & Schleimer, 2020; Umrani et al., 2022). Studies have highlighted that firms need to develop and maintain ACAP for the competition since ACAP could strengthen, complement, and redirect their knowledge base (Gölgeci et al., 2017; Lane et al., 2006). Past research on ACAP has explored the ACAP for technological knowledge (e.g., innovations, research and development) and the adoption of industry best practices of firms in various sectors (K. T. Cheng & Hung, 2021; Kmieciak & Michna, 2018; Ponce-Espinosa et al., 2022).

To gain an edge over their rivals, Firms need to acquire both technological and non-technological knowledge (such as market knowledge, supply chain knowledge, and industry regulation knowledge) in order to develop in their markets (Ponce-Espinosa et al., 2022; Rakthin et al., 2016; Roldán Bravo et al., 2020). However, the studies of ACAP for non-technological knowledge, especially market knowledge (i.e., knowledge about the customers and competitors in the market), are still limited (Rakthin et al., 2016). As such, the literature lacks an extensive understanding of how firms acquire, assimilate and utilise market knowledge. Roxas et al. (2014) underscore knowledge management as a highly relevant component for small firms’ growth and survival, however, knowledge management adoptions seem to be an understudied topic in the context of small firms (Roxas et al., 2014), so the extent to which ACAP for large firms’ technological knowledge can be applied to that of small and medium-sized firms’ market knowledge remains unclear.

To thrive in the dynamic and intricate modern market, businesses need to not only utilise existing marketing knowledge and strategies but also venture into novel approaches (Ho et al., 2020). This study intends to address these shortcomings by examining the relationship between the market knowledge ACAP (e.g., routines vs extra work, organisational culture, leadership, the trustworthiness of knowledge source) of Thai SMEs and knowledge creation outcomes (e.g., knowledge creation activities, and firm private knowledge). The authors chose Thailand as the research setting because, similar to other developing economies, SMEs are essential in driving Thai economic activities. This study used partial least squares (PLS) path modelling, a variance-based structural equation modelling (SEM) technique, to test the hypotheses.

Several studies have highlighted the ambiguity and reification problems associated with the ACAP construct (Lane et al., 2006; Volberda et al., 2010). According to Song et al. (2018), the widespread adoption of Zahra and George’s (2002) generic ACAP dimensions has arguably exacerbated these ambiguity issues. As ACAP is known to be inherently context-specific (Pu et al., 2023; Zahra et al., 2015), the type of knowledge that a firm aims to transfer (technological or non-technological) can also influence how ACAP impacts organisational outcomes (Song et al., 2018). In response, this study contributes to the literature by proposing new dimensions of absorptive capacity specific to market knowledge based on Matusik and Heeley’s (2005) conceptualisation.

In presenting this study, the authors first reviewed: the ACAP literature, focussing on factors (routines vs extra work, organisational culture, knowledge-oriented leadership, trustworthiness of knowledge source) affecting ACAP for market knowledge, and knowledge creation outcomes. Then, the authors proposed a conceptual framework from which the hypotheses were developed. Next, the authors described the research design, data collection, and analysis steps. The findings section presents the analysis to demonstrate how these four factors affect firms’ knowledge creation outcomes. Finally, the article concludes with research limitations, potential areas for future research, and managerial implications.

2. Theoretical background and hypotheses

2.1. Absorptive capacity

Absorptive capacity (ACAP) is a crucial construct in organisational learning and knowledge management. ACAP is defined as a firm’s ability to identify, assimilate and exploit external knowledge (Cohen & Levinthal, 1990). Mowery and Oxley (1995) described ACAP as “a broad set of skills needed to deal with the tacit component of transferred knowledge and modify imported knowledge”. Matusik and Hill (1998) suggested that after organisations acquire new knowledge, knowledge can be held at the individual level (i.e., knowledge and its members’ expertise) and at the collective/organisational level (i.e., in its routines, documentation, procedures, shared experiences, and know-how). ACAP allows firms to exploit new external knowledge and predict the nature of future knowledge advances (such as the firms’ future technology and R&D areas) (Cohen & Levinthal, 1990).

ACAP can be classified into latitudinal and longitudinal ACAP (Vasudeva & Anand, 2011). Latitudinal ACAP is defined as an ability to acquire and use diverse knowledge (Anand et al., 2007; Vassolo et al., 2004). In contrast, longitudinal ACAP is defined as an ability to acquire and use distant knowledge. The longitudinal ACAP comes into play when the firm seeks novel and unfamiliar expertise remote from its core. At a lower level of technological distance between a firm and its portfolio, the burden on its latitudinal ACAP becomes more manageable (Vasudeva & Anand, 2011).

Past research has examined various dimensions of ACAP and increased knowledge creation activities as well as organisations’ private knowledge. For instance, Matusik and Heeley (2005) found that (1) the firm’s relationship with its external environment (such as R&D alliances and collaborations); (2) the firms’ systems, structures, routines, and its relevant public industry knowledge, and (3) individuals’ absorptive abilities can affect firms’ technology ACAP and knowledge creation. The current study adapted the dimensions of ACAP provided by Matusik and Heeley (2005) and applied them in the context of SMEs’ market knowledge.

2.2. ACAP for market knowledge

Although past research on ACAP has considerably illuminated the ACAP types and determinants, the literature tends to focus mainly on technological knowledge and technological organisations (e.g., information technology, research and development) (Mormina, 2019). Knowledge crucial for the organisations’ survival and competitive advantage may involve non-technological knowledge such as market knowledge, supply chain knowledge, and industry regulation knowledge. Market knowledge consists of customer and competitor intelligence (Kelly, 2006; Wright et al., 2002). Firms with ACAP for market knowledge could capture opportunities and create new products that customers need. They could use market knowledge to improve the products and processes to suit the market demand (Teece, 2007; Van den Bosch et al., 1999). Market knowledge can also help organisations acquire and retain customers (Rakthin et al., 2016).

Despite the importance of market knowledge, there have been limited studies on ACAP for market knowledge (e.g., Jiménez-Castillo & Sánchez-Pérez, 2013; Rakthin et al., 2016). These studies pointed out that many firms failed to acquire and disseminate market knowledge from their marketing and sales managers. Firms, especially SMEs with limited resources, may have challenges integrating this market knowledge into the firm knowledge repertoire. Without the solid ACAP for market knowledge, firms may not effectively transform and utilise market knowledge to timely respond to customer demands (Le Meunier-Fitz Hugh & Piercy, 2006; Rakthin et al., 2016). Thus, this study investigates the relationship of market knowledge ACAP and knowledge outcomes of Thai SMEs by incorporating the important managerial perceptions and adapting the dimensions of technological knowledge ACAP offered in the study of Matusik and Heeley (2005).

2.2.1. Routines

To increase the ACAP for market knowledge, organisations should have practices or routines that enable organisational members to “route new external knowledge to the appropriate people and areas within the organisations” (Matusik & Heeley, 2005). According to Ponce-Espinosa et al. (2022), the hierarchy of authority and structures related to knowledge management in an organisation are the two mechanisms that allow organisational routine. Such practices or routines enable experiential learning and can also commit the organisation to those practices by claiming resources and managerial attention (Ocasio, 1997). In addition, the presence of practices and routines for knowledge acquisition and assimilation could facilitate a firm’s private knowledge creation (King & Lenox, 2002; Matusik & Heeley, 2005).

Most studies in the organisational learning area tend to emphasise the technological knowledge ACAP, such as new technology and best practices in the industry. Organisational members tend to acquire this technological knowledge from external sources (e.g., contingent workforces such as consultants, experts, partners, and collaborators in other organisations (Matusik & Heeley, 2005; Matusik & Hill, 1998). However, market knowledge, such as customer and competitor data, tends to be collected, analysed, and created by internal sources (e.g., sales and marketing personnel who frequently and directly interact with customers and competitors in the field.).

Sulistiawan et al. (2022) highlight that regardless of the organisation’s endeavours to encourage the exchange of knowledge among its employees, some individuals might conceal their knowledge to uphold their power and position within the workplace. Similarly, given that the salespeople’s key interest is to meet their sales target, they may be reluctant to share detailed market knowledge with their colleagues in the sales team for fear that their colleagues may benefit from this market insight and outperform them. Moreover, when organisations lack practices and routines for sharing market knowledge, sales and marketing staff may view the knowledge-sharing task as extra work (non-routine tasks) and choose not to share their knowledge. This situation, in turn, results in a decrease in knowledge creation within the organisation. Therefore, setting knowledge sharing practices as routines in the organisation is one dimension of market knowledge ACAP which this study incorporates.

2.2.2. Supportive organisational culture

Another dimension of market knowledge ACAP is a supportive organisational culture of a firm. The behaviour and willingness of employees to share knowledge can be either encouraged or impeded by the organisational culture, as highlighted in the study by Koay et al. (2022). In organisational learning literature, supportive organisational culture refers to the administrative mechanisms and processes “which build interpersonal familiarity, personal affinity, and convergence in cognitive maps [or knowledge]¹ among personnel from different subsidiaries” (Gupta & Govindarajan, 2000, p. 479). These mechanisms include, for instance, policies and incentives that facilitate and encourage knowledge acquisition, assimilation, transformation, and application within a firm (Simonin & Özsomer, 2009; Van Maanen & Schein, 1979). In other words, a firm’s supportive organisational culture refers to norms and beliefs that facilitate the knowledge flow in the firm to support employees’ feelings of inclusiveness and better decision-making (Khaksar et al., 2020). Organisational culture can promote common patterns of perceiving, thinking, feeling, deciding, and behaving (Nobel & Birkinshaw, 1998). These common patterns provide meaning, stability, and comfort for communication openness among the interacting parties. They also help reduce anxiety resulting from the inability to understand or prepare for unexpected events (Gupta & Govindarajan, 2000; Schein, 1990).

A supportive organisational culture (i.e., suitable knowledge-sharing policies and incentives) can motivate organisational members to share and help others (Gupta & Govindarajan, 2000; Van Maanen & Schein, 1979). This sharing practice can then stimulate an intra-firm transfer of market knowledge and encourage knowledge acquisition and knowledge-sharing activities at the individual and group level. Several scholars claimed that a supportive organisational culture could disrupt traditional organisational structures (Al‐Alawi et al., 2007). Nevertheless, organisations’ knowledge transfer, creation and application could be constrained by an unsupportive organisational culture (Khaksar et al., 2020). The authors expect that this factor could facilitate the new market knowledge assimilation and increase its knowledge creation.

2.2.3. Knowledge-oriented leadership

Knowledge-oriented leaders promote learning environments and empower their followers to explore and exploit acquired knowledge (Donate & de Pablo, 2015; Donate et al., 2011). Thus, knowledge-oriented leaders should be role models who challenge their teams to acquire and use new knowledge. They should provide incentives and training to create a learning organisation. They should also foster an organisational culture that encourages cross-functional and cross-discipline engagements while tolerating mistakes from experiments (Williams & Sullivan, 2011). In summary, knowledge-oriented leaders would promote mechanisms and systems for knowledge acquisition, transfer, and utilisation.

To promote knowledge creation, knowledge-oriented leaders commit to setting conducive environments for organisational learning activities such as research, development, and experimentation (Donate et al., 2011). Khin Khin Oo and Rakthin (2022) also underscore that knowledge-oriented leadership could promote an organisation’s resilience by facilitating the firm’s ability to acquire, assimilate, transform, and exploit new external knowledge. Moreover, knowledge-oriented leaders aim to develop appropriate incentives to motivate organisational members to share and create new organisational learning (Nonaka & Takeuchi, 1996). Thus, knowledge-oriented leadership is incorporated as an important dimension of ACAP for market knowledge.

2.2.4. Trustworthiness of knowledge source

Lo and Tian (2020) indicate that the motivation to share knowledge is shaped by factors beyond organisational elements like organisational culture. The scholars proposed that the knowledge sharing activities could be influenced by individualised factors, such as trust (Lo & Tian, 2020; Sharif et al., 2022). Trust refers to “the willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party” (Mayer et al., 1995, p. 712). Trust is crucial in knowledge acquisition, especially the knowledge sources’ trustworthiness and promotes market knowledge transfer between organisational members (Ranucci & Souder, 2015). Past research found that the knowledge source’s trustworthiness could send a valuable signal to the recipient and encourage the recipient to acquire knowledge from the source (Pacharapha & Ractham, 2012). Accordingly, knowledge recipients may be reluctant to accept learning from sources that are deemed unreliable and untrustworthy. In such cases, advice and information from dubious sources can be challenged and refused (Szulanski, 1996). Thus, the trustworthiness of knowledge source is another important dimension to consider for capturing market knowledge in a firm and lacking credibility reduces the motivation to seek knowledge and validate intelligence from such sources.

The perceived trustworthiness of knowledge sources could also affect the sharing and creation of market knowledge among the sales and marketing teams. Previous research found that managers in the support units believe that sales and marketing teams working on the front line may not fully share market knowledge with them. The managers thought that the front-line personnel might intentionally keep part of the market knowledge to themselves, especially when there might be a conflict of interest due to sharing such knowledge (Rakthin, 2016). Thus, the lack of trust between the managers and the front-line employees may affect knowledge-sharing activities.

2.3. Knowledge creation activities and firm private knowledge

Several scholars have emphasised the dependence of ACAP on the stable and robust organisational learning processes (Gebauer et al., 2012). This learning capability allows firms to effectively leverage their existing knowledge base alongside knowledge acquired from external sources. Through this process, firms can transform these combined knowledge resources into new capabilities (Cohen & Levinthal, 1990). Building on Matusik and Heeley’s (2005) work, which highlighted the connections between various ACAP dimensions and firm knowledge outcomes (knowledge creation activities and private knowledge), this study proposes that the possession of superior market knowledge ACAP can lead to more extensive knowledge creation activities and contribute to the expansion of a firm’s private knowledge base.

2.3.1. Knowledge creation activities

Matusik and Heeley (2005) stated that knowledge-creation activities involve the discussions of processes and routines and the combination of knowledge and expertise from various sources. Hence, to promote knowledge-creation activities, firms should exchange day-to-day operational details and share technological expertise with their strategic alliances or partners. They should, nevertheless, share long-term information and non-technological knowledge, e.g., market direction, changes in customer preferences, new product launches, and pipelines, with their strategic partners to increase the business information range (Malhotra et al., 2005).

ACAP facilitates the integration of new knowledge with existing knowledge bases within a firm (Zahra & George, 2002). This process can lead to the creation of innovative solutions and entirely new knowledge through recombination. When the business information range and the firms’ market knowledge expand, knowledge creation activities will enable firms to better understand their changing business environments. The newly created knowledge can help firms capture new market opportunities (e.g., find a market niche; offer more product lines for new customer groups). Moreover, knowledge creation activities can help firms realise and respond to customers’ emerging needs and enhance the firms’ operations and performance (Levinthal & March, 1993).

2.3.2. Firm private knowledge

The firm private knowledge level (or the knowledge that is exclusive to a firm) will expand when new external knowledge is assimilated with prior firm knowledge to complement its capabilities (Matusik & Heeley, 2005; Matusik & Hill, 1998; Nonaka & Takeuchi, 1996). This combined knowledge could make a difference in firm performance and competitive advantage.

Technological knowledge (e.g., technology procedures and best practices) is more explicit. However, market knowledge has unique characteristics which comprise both explicit (customers and competitor characteristics data) and tacit elements (e.g., values, assumptions, and preferences of customers and how best to approach each customer). Moreover, data about customers and competitors tend to be specific to each firm and business context and may not be readily applicable to other firms.

Therefore, from the review of the literature, a conceptual framework is proposed, as shown in Figure 1 from which the following hypotheses are derived:

Figure 1. Conceptual Framework.

H1a –H1e:

A positive relationship exists between a) routines, b) extra-work, c) trustworthiness of the source, d) supportive organisational culture, and e) the knowledge-oriented leadership dimension of ACAP and knowledge creation activities.

H2a –H2e:

A positive relationship exists between a) routines, b) extra-work, c) trustworthiness of the source, d) supportive organisational culture, and e) the knowledge-oriented leadership dimension of ACAP and firm private knowledge.

2.4. Research context: Thai SMEs

SMEs play a critical role in the world economy as the engines of economic growth and development. Similarly, SMEs are crucial for Thailand’s economy. Thai economic growth is directly proportional to the rapid expansion of SMEs’ business activities, where approximately 99.53% of the total business ventures, or over 3.1 million firms in Thailand, are SMEs. In December 2019, Thai SMEs generated revenues of up to 35.3% of GDP or THB 5.96 trillion. They represented more than a total employment of 69.48% or 12.06 million people (Office of Small and Medium Enterprises Promotion, 2020). Compared to large organisations and well-established multinational corporations, most Thai SMEs face several challenges (e.g., limited access to skilled human resources, capital, and knowledge absorption and creation that are crucial for innovating and expanding their businesses). Thus, Thailand’s government and private sectors have tried to address SMEs’ challenges in their 13th National Social and Economic Development plan for 2021–2025 (Theparat & Chantanusornsiri, 2018). For instance, the government has provided access to financial sources (e.g., Start-up and SME funds and incentive taxes) and expedited the regulatory issues (e.g., company registration) and knowledge support (e.g., seminars, business networking, and training).

Furthermore, the recent COVID-19 pandemic impacted greatly SMEs in Thailand. The Thai government, therefore, seeks strategies and guidelines to enhance the SMEs’ capacity for surviving and recovering from the pandemic and achieving long-term growth (The Office of Small and Medium Enterprises Promotion, 2021). The Thailand Board of Investment (BOI) also launched a new five-year investment promotion strategy for 2023–2027 to promote investment and restructure the country’s economy (Bangkok Post, 2022). One of their primary purposes is to strengthen SMEs and start-ups by ensuring they are linked to the global market and supply chain. Thus, understanding how ACAP for large firms’ technological knowledge could be applied to the ACAP for SMEs’ market knowledge would be beneficial for developing strategies.

3. Methodology

This study used partial least squares (PLS) path modelling, a variance-based structural equation modelling (SEM) technique, to test the hypotheses simultaneously. The method has been commonly used in management and marketing research (Bontis & Serenko, 2007; Bontis et al., 2007).

3.1. Sample and data collection

Data were collected from 189 Thai SMEs (N = 189) who were Business Networking International (BNI) members in Thailand. BNI is regarded as one of the world’s most extensive business networking and professional referral organisations. Nowadays, BNI has over 220,000 members in 8,000-plus chapters worldwide. In Thailand, BNI was first established in 2006, and has since grown to over 24 chapters with approximately 1,000 members. The researchers collected data through emailed survey questionnaires with covering letters, sent to the SME entrepreneurs or top managers who were BNI members. The approximate response rate is 18.9%.

Following the extant literature, this study aimed to collect data from SME entrepreneurs or top managers because they tend to be decision-makers and are involved in either market planning or new product/service development tasks. The selection of key informants who know their organisational matters through their position was consistent with an approach suggested by John and Weitz (1988). Prenotification and phone calls were made to encourage respondents’ participation. The screening questions were used in the survey to identify the participants’ qualifications and appropriateness. The researchers screened the potential participants based on whether they knew the processes and strategies in sales and marketing.

Regarding the sample size, a normative rule of thumb for robust PLS-SEM estimations (Barclay et al., 1995) suggests researchers use a minimum sample size of ten times the maximum number of paths directed at any particular construct in the inner path model. Our maximum number of paths is eight. Therefore, the minimum sample size required for the analysis is 80. This study’s actual sample size (N = 189) exceeds the minimum sample size needed for using PLS (Barclay et al., 1995).

3.2. Survey instrument development

Survey instruments to assess the focal constructs were developed based on the extant literature. Since the research participants are Thai SME entrepreneurs and top managers, the authors designed the Thai language survey. Before the pre-test study, the authors followed Brislin’s (1990) recommendation for survey translations across different languages. First, the researchers, fluent in English and Thai, created and translated the English version into Thai. These researchers and the other two independent Thai faculty members (proficient in English and specialised in management areas) improved the translation through an iterative process. Any discrepancies between the English and Thai versions were checked and corrected. To validate the translation, the researcher asked three Thai SME executives and/or owners who were not affiliated with this study to read through the Thai version to test if it was readable and easy to comprehend. Any concerns were noted and addressed. Afterwards, the other two Thai SME executives and/or owners not linked to the study were asked to read through the revised version. Any concerns were addressed in the final survey. A pre-test study was then conducted using an online survey with a new group of executives and/or owners in each SME (N = 30). Eventually, the web-based survey was launched online.

3.3. Measures

The key ACAP constructs for market knowledge were generally operationalised using existing well-validated scales or measures. Most constructs were operationalised into items and responses on a seven-point Likert scale ranging from (1) “Strongly Disagree” to (7) “Strongly Agree”. Since our study used a self-report survey, we performed Harman’s single factor test (Podsakoff et al., 2003) to analyse how much the results might be contaminated by common method bias. The test showed that common method bias did not appear to be a pervasive problem in this study.

Since this study aims to explore the ACAP for market knowledge instead of the ACAP for technological knowledge, the authors adapted the questionnaires of earlier studies with technological knowledge questions into market knowledge questions. To ensure the respondents correctly understood the term “market knowledge”, the definition was explicitly shown at the beginning of the survey questions as follows: “Market knowledge is defined as knowledge of customers (e.g., customer behaviours) and buying decision model and competitors (e.g., industry understandings, and strengths and weakness of the competitors)”.

3.3.1. Routines

Routines comprise associated and repeated behaviours that link many people’s actions to create consistent results (Nelson & Winter, 1982; Szulanski et al., 2004). King and Lenox (2002) found that routines and practices enhanced the creation of new related practices Similarly, Matusik and Heeley (2005) suggested that routines and structures help define “responsibilities, technical experts, and complementary managerial competence”, and they enhance the absorptive capacity and new external knowledge adaptation. Thus, in this study, the routines’ construct operationalisation was based on Matusik and Heeley’s (2005) questionnaires.

3.3.2. Non-routine tasks or extra work

Routine tasks are performed by following clear steps and procedures and tend to be handled according to previous experience. However, non-routine tasks (or extra work) may be adjusted by the task performers to match their emerging situations and available information (J. L. C. Cheng & Miller, 1985; Lillrank, 2003). Galbraith (1977) suggested that organisations that frequently perform non-routine tasks should rely less on policies or procedures. However, they should focus more on task feedback so that organisational members have relevant input information to accomplish the tasks. Staffs who deal with non-routine tasks tend to use their tacit knowledge since there may not be non-tacit knowledge (e.g., procedures and documentation) available for them (Davenport & Prusak, 1998; Schafermeyer et al., 2010). Due to this, the authors slightly adapted material from Galbraith (1977) and Schafermeyer et al. (2010) for the non-routine tasks or extra-work measurement in this study.

3.3.3. Trustworthiness of knowledge source

Trust can be developed when the information source is perceived as trustworthy (Mayer et al., 1995; Szulanski et al., 2004). Hence, when the knowledge source is perceived as reliable, it will significantly increase the chance that the recipient will accept it. Many studies show that in a trusting environment, people tend to increasingly exchange knowledge and information (Szulanski et al., 2004). Moreover, a trust could also reduce the organisations’ information exchange cost (Szulanski et al., 2004), and the trustworthiness of knowledge sources also increases cooperation within companies (Dirks & Ferrin, 2001; Kramer, 1999). The authors adapted the four items of source trustworthiness from Mayer et al. (1995) and Szulanski et al. (2004).

3.3.4. Supportive organisational culture

Organisational culture is a critical factor that can stimulate knowledge sharing and teamwork in an organisation. Organisational learning occurs when organisations solve issues by adjusting to the environment and combining the lessons learned with their firm private knowledge. Each organisation tends to have its own culture, continuously developing and evolving over time. Gupta and Govindarajan (2000) suggested that organisational culture encompasses various components (such as organisation structure, information systems, people, processes, leadership, and reward systems). However, as previously mentioned, supportive organisation culture in this study refers mainly to the internal mechanisms and processes that “build interpersonal familiarity, personal affinity, and convergence in cognitive maps among personnel of different subsidiaries”. The tools and processes include learning orientation and incentives that facilitate and encourage knowledge acquisition, assimilation, transformation, and application within a firm (Simonin & Özsomer, 2009; Van Maanen & Schein, 1979). Therefore, the authors used four items based on the works of Prahaland and Hamel (1990), Pucik (1988), and Simonin and Özsomer (2009) to measure the supportive organisational culture construct.

3.3.5. Knowledge-oriented leadership

Knowledge-oriented leadership combines two leadership styles: transformational leadership; and transactional leadership, with solid communication and motivational skills (Donate & de Pablo, 2015; Ribière & Sitar, 2003). Knowledge-oriented leaders focus on clearly communicating with staff about the company’s objectives and expectations. These leaders should also use rewards as a tool to promote knowledge sharing. To assess the extent of knowledge-oriented leadership of the management or top executives in Thai SMEs, the authors adopted six well-validated items from the Donate and de Pablo (2015) questionnaires.

3.3.6. Knowledge creation activities

To continuously build firm private knowledge, organisations need to promote knowledge exploring and exploiting of activities. They should learn to apply new methods and concepts to complement the existing organisational learning routines (March, 1991). Knowledge creation activities involve the discussions of procedures and routines and the effort of merging different areas of expertise. In Matusik and Heeley’s (2005) study, knowledge creation activities assess how often staff in the organisation discuss topics such as: “new features, products, technical routines or procedures, documentation, and communication patterns within and across the programming area” (p. 561). The scholars also argued that firms with more knowledge-creation activities tend to build more private knowledge. In this study, the authors adopted a three-item scale of knowledge creation activities from Matusik and Heeley (2005) and constructed a new five-item Likert scale based on the specific market knowledge context. The anchor points for item rating ranged from (1) “Never” to (7) “Always”.

3.3.7. Firm private knowledge

Firm private knowledge is the knowledge that is considered unique to a firm (Matusik & Heeley, 2005). It usually increases when external knowledge is added or combined with existing knowledge. Matusik and Heeley (2005) claimed that firms’ different private knowledge levels could affect firms’ performance and competitive advantage. Similar to the knowledge creation activities construct, the authors adopted a three-item Likert scale of firm private knowledge based on Matusik and Heeley (2005) and made a new three-item Likert scale to measure Thai SMEs’ private market knowledge. According to Matusik (2002)’s measure of private knowledge, respondents were asked to evaluate the firms’ effectiveness on the private knowledge dimensions.

3.3.8. Control variables

To evaluate the proposed model’s robustness, the authors included three control variables that can influence the outcomes: firm profitability, firm size, and firm age. As the previous literature suggests (e.g., Matusik & Heeley, 2005), superior resources and knowledge positions are associated with firm profitability. Thus, higher profitability can also enable firms to invest more in firm resources. As a result, firm profitability may be linked to some independent and dependent variables in the proposed model (Matusik & Heeley, 2005). In this study, the authors measured the overall firm’s profitability by asking the respondents to rate (from 1 to 7) their revenue-based performance (i.e., sales and marketing share) and cost-based performance (i.e., ROI and overall profit) over the past two years: (1) “Very Poor” to (7) “Excellent”. The respondents also assessed these two performances over the past two years when compared with their competitors: (1) “Much worse than competitors” to (7) “Much better than competitors”.

Similarly, most empirical studies included firm size as a control variable since larger firms were likely to possess more resources and market power. Hence, it is a variable that should be controlled. The definition of Thai SMEs includes firms with employees of up to 200 people. The authors used the number of employees as a control variable for the firm size effects.

As a firm with long business experience will likely build or acquire more complementary resources (Teece, 1986), thus enhancing their knowledge positions, then, firm age, defined as the number of operating years since establishment, was included as another control variable affecting the firm’s private knowledge and knowledge-creation activities.

4. Analysis and results

4.1. Assessing the reliability and validity of measures

Convergent validity is determined by factor loading, average variance extracted (AVE), and composite reliability (CR). Item reliability is assessed by examining AVE and CR. As presented in Table 1, all factor loadings were over the 0.5 guidelines (Bagozzi & Yi, 2012; Peterson, 2000). In addition, AVE were all above 0.5 minimum threshold values suggested by Nunnally (1994) and Bagozzi and Yi (1988), and CR values exceeded 0.8, respectively, demonstrating adequate convergent validity and that all items are reliable for further analysis.

Table 1. Validity composition.

Scales	Variables	Factor Loadings
Routines (ROU) AVE = .714 CR = .908	ROU1 ROU2 ROU3 ROU4	.673 .885 .906 .894
Extra-Work (EXT_WRK) AVE = .505 CR = .801	EXT_WRK1 EXT_WRK2 EXT_WRK3 EXT_WRK4	.610 .711 .832 .672
Trustworthiness of Source (TRUST) AVE = .747 CR = .922	TRUST1 TRUST2 TRUST3 TRUST4	.878 .883 .856 .838
Supportive Org. Culture (SUP_CUL) AVE = .729 CR = .915	SUP_CUL1 SUP_CUL2 SUP_CUL3 SUP_CUL4	.869 .779 .871 .892
Knowledge-Oriented Leadership (KOL) AVE = .711 CR = .936	KOL1 KOL2 KOL3 KOL4 KOL5 KOL6	.850 .883 .873 .861 .831 .756
Knowledge Creation Activities (KNC_ACT) AVE = .632 CR = .932	KNC_ACT1 KNC_ACT2 KNC_ACT3 KNC_ACT4 KNC_ACT5 KNC_ACT6 KNC_ACT6 KNC_ACT8	.785 .805 .851 .849 .711 .813 .822 .709
Private Knowledge (PRIV_KN) AVE = .635 CR = .912	PRI_KN1 PRI_KN2 PRI_KN3 PRI_KN4 PRI_KN5 PRI_KN6	.749 .823 .704 .824 .814 .860

To examine discriminant validity, the authors tested whether inter-construct correlations were significantly less than 1.0 (Bagozzi et al., 1991) and found that this was the case for all correlations. Besides, as Fornell and Larcker (1981) recommended, the authors tested whether the square root of AVE values was greater than any correlation values among the constructs. Table 2. shows that AVE’s square root of diagonal values exceeds the construct correlations or off-diagonal values, thus adequately confirming discriminant validity. The measurement model’s evaluation fully supports all constructs’ reliability, convergent validity, and discriminant validity.

Table 2. Correlation matrix.

	EXT_WRK	KNC_ACT	KOL	PRIV_KN	ROU	SUP_CUL	TRUST
EXT_WRK	0.711
KNC_ACT	0.509	0.795
KOL	0.441	0.673	0.843
PRIV_KN	0.521	0.723	0.616	0.797
ROU	0.553	0.664	0.583	0.666	0.845
SUP_CUL	0.471	0.597	0.641	0.667	0.634	0.854
TRUST	0.587	0.598	0.477	0.700	0.690	0.653	0.864

Correlations are below the diagonal and the square root of the Average Variance Extracted (AVE) are on the diagonal.

4.2. Testing the hypothesised structural model

Previous extant research suggests that the authors used PLS-SEM path modelling to estimate the model’s effects (Hair et al., 2021). Overall, the predictors were found to offer a reasonable explanation for the focal constructs: R² for knowledge creation activities = .598; and R² for firm private knowledge = .665. The authors used a bootstrapping procedure with 500 resamples to test the effects and ascertain the statistical significance of the parameter estimates. The positive and significant effects of routines (β = .238, p < .01; β = .128, p < .05) on knowledge creation activities and firm private knowledge supported H1a and H2a. However, there was no significant effect of the extra-work dimension of ACAP on both knowledge creation activities and firm private knowledge; thus, H1b and H2b were not supported.

The positive effects of the source’s trustworthiness (β = .260, p < .001) and supportive organisational culture (β = .119, p < .05) on firm private knowledge were significant, whereas the effects of both constructs on knowledge creation activities were not significant. These results supported H2c and H2d but not H1c and H1d. Finally, the results also showed significant positive effects of knowledge-oriented leadership (β = .374, p < .001; β = .204, p < .01) on knowledge creation activities and firm private knowledge; thus, supporting H1e and H2e.

Among the control variables, only firm profitability (β = .250, p < .001) is positively related to firm private knowledge. There was no significant effect of firm profitability on knowledge-creation activities. The authors also found no significant effects of firm size and firm age on both knowledge-creation activities and firm private knowledge.

5. Discussion

This article examines the relationship between the factors (e.g., routines, supportive organisational culture, knowledge-oriented leadership, and trustworthiness of knowledge source) of Thai SMEs’ ACAP for market knowledge and the knowledge creation outcomes. Consistent with previous research, the results suggested that routines enhance market information flows and establish new related practices in market knowledge acquisition and assimilation. Thus, routines help increase knowledge creation activities and firm private knowledge in SMEs. Similarly, knowledge-oriented leadership is positively related to Thai SMEs’ market knowledge outcomes. This is because it creates incentives and rewards conducive to explorative and exploitative learning (Donate et al., 2011). The motivational elements and rewards for knowledge-creation activities help firms develop knowledge-sharing and knowledge-conversion initiatives. These knowledge-sharing activities could increase a firm’s private knowledge (Nonaka & Takeuchi, 1996).

Moreover, the result highlighted a positive relationship between the source’s trustworthiness and SMEs’ private knowledge. Previous research suggests that individuals within a firm are more likely to route information to others depending on whether: (a) individuals perceive that such information is pertinent to the others; (b) the firm provides rewards for information sharing; and (c) individuals have recently had an experience of routing information to others (Huber, 1991). However, knowledge recipients will be less likely to seek more knowledge or to validate such knowledge if the sources lack credibility or are perceived as untrustworthy.

Finally, the result showed that a supportive organisational culture positively influenced the firm private knowledge of Thai SMEs. This could be because, compared to large firms, SMEs tend to have fewer employees and usually work in a close working environment. Thus, SMEs’ close-knit working community helps promote common patterns of how the employees perceive, think, feel, and behave. These shared patterns help reduce anxiety when organisational members cannot understand or predict events (Gupta & Govindarajan, 2000; Schein, 1990). The shared patterns (especially in SMEs with a solid knowledge-sharing culture) could provide stability and comfort for communication openness among the interacting parties. The supportive organisational culture that promotes learning could motivate employees to share and help others, thereby facilitating private knowledge accumulation in SMEs.

5.1. Limitations and managerial implications

In summary, this research builds upon Matusik and Heeley’s (2005) work by proposing new ACAP dimensions specifically tailored to market knowledge. This refined framework can help scholars better understand how firms absorb and utilise market knowledge to achieve positive outcomes. The study’s result provides insights into the relationship between Thai SMEs’ ACAP for market knowledge and knowledge outcomes. Regarding the study’s limitation, although the study suggests positive relationships between ACAP for market knowledge and knowledge outcomes, it cannot explain how and why such relationships exist. To illuminate the unexplained relationship, future studies could conduct qualitative research (e.g., an in-depth case study or a longitudinal study) to explain how and why ACAP for market knowledge is linked to the knowledge creation activities responsible for a firm’s private knowledge. Such studies would aim to identify to what extent routines, supportive organisational culture, knowledge-oriented leadership, and trustworthiness of sources are crucial for managers. Researchers should examine SMEs’ critical challenges for improving ACAP for market knowledge and the extent to which they might enhance their ACAP for market knowledge.

As for the managerial implications, even though this study highlights the importance of incentives for knowledge sharing, SMEs may have limited financial resources for reward schemes for market knowledge acquisition and utilisation. Managers and top executives should consider incorporating non-monetary incentives to motivate employees to enhance the firm’s ACAP for market knowledge. Managers should also focus on cultivating leadership practices that incentivise and reward both explorative and exploitative learning. Creating incentives and rewards for information sharing, along with ensuring the credibility of knowledge sources, can encourage a culture of trust. This, in turn, is likely to facilitate effective knowledge dissemination and validation, positively impacting the accumulation of private knowledge within a SME. By recognising the role of knowledge-oriented leadership and supportive organisational culture, managers should consider investing in learning initiatives. This could involve training programs, workshops, and activities that promote a culture of continuous learning and knowledge-sharing. The findings of this research also underline that establishing clear channels for information sharing, ensuring the relevance of shared information, and building mechanisms for validating knowledge can contribute to a more trustworthy knowledge-sharing environment, which could positively impact the firm’s private knowledge.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The work was supported by the Thailand Research Fund [TRG5880138] and College of Management, Mahidol University.

Notes

1. Matusik and Hill (1998) defines knowledge about the overall functions of the organisation as “architectural knowledge” whereas knowledge that is specific to a particular function or department is defined as “component knowledge”.