Augmenting learning processes of absorptive capacity for innovation: Insights for effective leadership within global pharmaceutical companies

• Published date: 01 July 2022
• Author: Mohammad Rezaei Zadeh,Ray Hackney,Jing Zeng
• Date: 01 July 2022
• DOI: http://doi.org/10.1111/emre.12477

RESEARCH ARTICLE

Augmenting learning processes of absorptive capacity for

innovation: Insights for effective leadership within global

pharmaceutical companies

Mohammad Rezaei Zadeh

1

| Ray Hackney

1

| Jing Zeng

2

1

Brunel University London, UK

2

University of Kent, UK

Correspondence

Mohammad Rezaei Zadeh, Brunel University

London. UK.

Email: S2117514@glos.ac.uk

Abstract

Absorptive capacity (AC), which comprises exploratory, transformative, and

exploitative learning processes, enables organizations to exploit external knowl-

edge for adopting innovation. Despite extensive research into AC, leadership

styles have received little attention. This paper discusses the results of a study

undertaken in three pharmaceutical organizations that augments AC theory relat-

ing to top- and middle-level management behaviour. The findings suggest that the

influence of transformational and transactional leadership styles varies between

the AC learning processes within and across organizations. We also explored

CEOs’knowledge, trust in middle management, and intention towards sharing

knowledge, which facilitate the learning processes. The research has implications

for the enhancement of opportunities to enable successful innovations based on

the recognition of leadership styles and managers’roles. We report several novel

contributions that are of value to academics and practitioners.

KEYWORDS

absorptive capacity, innovation, leadership, organizational learning

INTRODUCTION

Leadership is considered one of the main factors that

facilitate absorptive capacity (AC) learning processes and

innovation (Darwish et al., 2020; Méndez et al., 2018;

Naqshbandi & Tabche, 2018; Rezaei-Zadeh &

Darwish, 2016; Sun & Anderson, 2012). AC refers to the

organizational potential to identify, absorb, and imple-

ment external knowledge for commercial outcomes such

as innovation (Cohen & Levinthal, 1990). Organizations

rely more on external knowledge for innovation because

of increasing competition (Chesbrough, 2003; Laursen &

Salter, 2006). Therefore, organizations invest heavily in

developing their capabilities, particularly their AC

(Lichtenthaler & Lichtenthaler, 2009).

It is widely argued that the influence of leadership on

AC and innovation goes beyond one level (Yukl, 2009).

This is particularly important as the development of

organizational knowledge, which is an outcome of

organizational learning processes, depends on top and

middle managers’leadership behaviours (Nonaka, 1994).

Top and middle managers are leaders in organizations:

top managers are leaders of entire organizations, and

middle managers are leaders of their own departments.

Despite the significant contributions of past studies

on the influence of leadership on AC and innovation, it is

evident that they focus mainly on transformational lead-

ership. Transformational leadership is defined as the type

of leadership that strengthens collective interest in achiev-

ing common goals (García-Morales et al., 2012). This

stream of research suggests a positive relationship

between transformational leadership and innovation and

between transformational leadership and AC learning

processes (e.g., Jung et al., 2003,2008; García-Morales

et al., 2008a,2012; Gumusluo

glu & Ilsev, 2009; Sun &

Anderson, 2012; Méndez et al., 2018). The transforma-

tional leadership style is considered to be the opposite of

the transactional leadership style. Transactional leader-

ship refers to a type of leadership that sets goals and con-

trols the organization’s progress towards them to ensure

the fulfilment of leaders’interests (Bass & Avolio, 2000).

Accordingly, most of the existing research assumes that

showing the influence of the transformational leadership

style on AC means that the transactional leadership style

DOI: 10.1111/emre.12477

European Management Review. 2022;19:263–284. wileyonlinelibrary.com/journal/emre © 2021 European Academy of Management 263

does not facilitate AC. Few recent studies have suggested

that the effective management of AC learning processes

and innovation requires a combination of both transfor-

mational and transactional leadership styles (e.g., Sun &

Anderson, 2012; Waddell & Pio, 2015).

These conflicting views indicate the need for further

investigation into transformational and transactional

leadership styles to see how they facilitate AC learning

processes. We suggest that the problem that hinders

researchers’attempts to resolve these conflicting views is

that they do not explore the influence of leadership on

organizational outcomes, particularly on innovation,

when studying AC learning processes. To address this

problem, we suggest that researchers should not limit

their studies to strategic leaders: they should also consider

the organizational context for innovation.

Innovation occurs within organizations through

either the adoption or the generation of creative ideas

(Damanpour & Wischnevsky, 2006; Gopalakrishnan

et al., 2010), and it has been consistently regarded as criti-

cally important to organizational effectiveness and per-

formance (Damanpour & Wischnevsky, 2006). It is

suggested that pursuing innovation through adoption

enables organizations to access external sources of

innovation (Crossan & Apaydin, 2010). It is apparent

that organizations prefer to adopt innovation, which is

driven by the availability of external knowledge

(Gopalakrishnan & Bierly, 2001; Laursen &

Salter, 2006). Therefore, we seek to explore how leaders

facilitate AC learning processes within the innovation

adoption context by focusing on the transformational

and transactional leadership of top and middle managers.

This approach is different from variance model that

emphasis conceptual constructions that relate variables

to one another, we adopt a process view that explores

how phenomena emerge, evolve or terminate over time

through activities and events (Cloutier & Langley, 2020;

Langley, 1999). Such process research, which view AC as

a process by which objectives become sequential, is essen-

tial to understand how external knowledge is realized

through a set of actions (Cloutier & Langley, 2020;

Darwish et al., 2020). Consequently, our motivation to

conduct this research is the desire to integrate transfor-

mational and transactional leadership to explore the roles

of top and middle leaders in facilitating the learning

processes associated with AC. Recently, researchers have

recommended cooperating transformational and transac-

tional leadership when studying the influence of leader-

ship on AC learning processes (Sun & Anderson, 2012;

Darwish et al., 2020) but there is limited evidence of this

approach. It has been noted, for example, that the com-

bined influence of different managerial levels has received

little attention. It is widely argued that leadership goes

beyond one level (Yukl, 2009) and that the facilitation of

learning processes depends on different leadership styles

(Vera & Crossan, 2004). Therefore, we focus on both top

and middle managers in this respect.

To explore the role of top and middle managers,

we studied three pharmaceutical companies through

interviewing managers and conducting observations.

Documents were also analysed from sources of secondary

data. Our outline findings indicated that both transfor-

mational leadership and transactional leadership influ-

ence the learning processes of AC. We explored three

mechanisms that facilitate their influence. Our findings

have contributed to our knowledge by showing how the

roles of top and middle managers differ across the learn-

ing processes of AC, while certain managers have more

influential roles. We have also contributed to the extant

literature by revealing three mechanisms that moderate

the leadership effects. Detailed explanation of our

research theoretical background, method, findings, and

contributions is provided in the following sections.

THEORETICAL BACKGROUND: AC AS

LEARNING PROCESSES

Zahra and George (2002) identify that AC is a type of

dynamic capability. Dynamic capabilities are organiza-

tional processes that enable organizations to modify,

change, delete, enhance, or reconfigure their resources

(Ambrosini & Bowman, 2009). Zahra and George’s

model broadly categorizes its processes as potential and

realized AC. Potential AC enables organizations to

value, acquire, and assimilate external knowledge, while

realized AC facilitates transformation and the implemen-

tation of external knowledge for innovation. The linear

relationship between the processes of AC has been criti-

cized by Todorova and Durisin (2007). They suggest that

the assimilation and transformational stages are not

sequential but rather substitute each other. Proponents of

Zahra and George’s model argue that organizations

analyse, comprehend, understand, and codify external

knowledge before acquiring knowledge (e.g., Camisόn&

Forés, 2010). From this point, they support the linear

relationship between potential and realized AC. It is

suggested that the performance of learning processes

facilitates the imitation and development of dynamic

capabilities (Helfat & Peteraf, 2003). Accordingly, AC

can be defined and conceptualized as learning processes,

namely exploratory, transformative, and exploitative

(Lane et al., 2006; Lichtenthaler, 2009). The main advan-

tage of defining AC as learning processes is that it settles

the challenge and disagreement about the construct.

Moreover, it shows how the learning processes perform

at the individual, group, and organizational levels.

The exploratory learning process occurs at the

individual and group levels (Sun & Anderson, 2010,2012).

At an individual level, the exploratory learning process

is enacted through the generation of initiatives and

individual discussion of the acquired and simulated

knowledge (Sun & Ande rson, 2012). Prior market and

technological knowledge are essential for the exploratory

264 REZAEI ZADEH ET AL.