Assessing the effects of the dimensions of knowledge absorption capacity on sustainable innovation of firms in ghana

Abstract

The global and dynamic landscape of the business environment necessitates firms to effectively assimilate, transform, and exploit their newly acquired knowledge to ensure the ultimate innovative result. However, innovation is a creative-destruction, as it could yield both positive and negative rippling effects. It is thereby imperative for firms to ensure that the implementation of their innovative activities, facilitated by effective firm-level absorption capacity, transcends beyond the economic dimension of sustainability to incorporate ecological and social dimensions. The study investigated the influence of the dimensions of absorption capacity on sustainable innovation of firms. The study was limited to 549 firms with data sourced from the Ghana Enterprise Survey combined with the Ghana Innovation Follow-up Survey, conducted in 2013 and 2014 respectively. The study applied both the ordered-logit and the logistic regression models. The study found that the knowledge acquisition capacity of firms exerts a significantly positive effect on firms’ likelihood to sustainably innovate. The capacity of firms to transform knowledge exerts significantly positive effect on firms' likelihood to sustainably innovate. Furthermore, knowledge exploitation capacity of firms was found to exert a positive and significant effect on firms’ likelihood to introduce at least a form of sustainable innovation. The study recommended that the government of Ghana, through the Ministry of Trade and Industry, in collaboration with the Ministry of Finance, should support research and development of firms through granting of interest-free loans for research and development purposes. The study, further, recommended that firms should prioritize investment in state-of-the-art machinery, ultra-modern equipment, and cutting-edge software to facilitate seamless knowledge transformation within the organization.