1. The base of the Research.
(Insert research background here – your pre-research, etc. See how this applicant wrote below:) Turbulent business environment and intense business competition lead to multifaceted challenges like globalization, demand for innovation, short product life cycles, product proliferation, and time to market pressures.
These challenges affect the IT industry in general and the software industry in particular. Dealing with such issues requires firms to focus on ‘knowledge’, a dominant source of sustainable competitive advantage. Thus, recognizing, assimilating, transforming and applying valuable external knowledge is imperative for firms’ success. This ability of a firm is termed as absorptive capacity.
The selection of this research area is justified through research conducted by Roberts et al. (2012). The researchers find that only 98 papers are published from 1990 to 2008, which directly or indirectly include the concept of “absorptive capacity”. 37% of papers use it as a minor citation, 50% use it as theoretical support, 13% use it in research models, and 5% use it as a theoretical base. This shows that there are limited empirical studies that use absorptive capacity in research models. This justification lays the initial ground to conduct this study.
Undoubtedly, the firm’s ability to absorptive capacity is important for survival in a dynamic environment. It not only helps in anticipating varying innovation trends but also in taking advantage of emerging opportunities ahead of competitors.
However, organizational mechanisms and capabilities play an essential role in the successful development and maintenance of absorptive capacity; hence should not be ignored. Many pieces of research focus on different organizational mechanisms like cross-functional interfaces, control systems, dominant values, connectedness, social relations, etc.
Based on the above arguments, this study integrates the concept of absorptive capacity in the IS field by combining IT capabilities and other organizational capabilities. Additionally, it proposes a framework for software firms (SFs) and intends to empirically investigate the impact of capabilities on absorptive capacity, which in turn, helps firms in achieving competitive advantage.
The software firms are selected for the study as they continuously innovate due to technological breakthroughs. Likewise, they focus on their absorptive capacity to develop new software according to external customers’ requirements.
1.2. Present Research Situation, Research Gap, and Further Development
(Elaborate current research situation, feasibility and workable gap available for your work here:)
Principally, Cohen’s research paper is the influential work on absorptive capacity. Later, other dominant researches are conducted by Szulanski, Zahra and George, Lane et al., and Todorova and Durisin (2007).
Cohen and Levinthal (1990) define absorptive capacity as a “firm’s ability to recognize valuable and new external knowledge, assimilate and transform this knowledge into the firm’s knowledge base, and then apply new knowledge through innovation and competitive actions”.
Besides filling the theoretical gap, this study contributes practically by focusing on Software Industry in China. The software industry faces intense competition, globalization, and technological breakthroughs.
These challenges put a constant burden on software firms (SFs) not only to innovate with internet-based services but also enhance their ability of absorptive capacity to develop new software according to changing customers’ needs. Furthermore, the massive yearly growth rate of Chinese software firms (Yuan, 2012) directs the author’s attention to design a framework that helps in improving their innovation, strategic flexibility, and performance.
1.3 Significance of the Study
(Explain the possible impact of your study)
As indicated, the absorptive capacity leverages a firm’s ability to gain a competitive advantage in today’s challenging and demanding business environment, which leads to shorter product life cycles and dynamic product proliferation.
This is especially the case with the software industry. Therefore, this study focuses on software firms (SFs) in China, which develops software and related services to external customers.
2. Research Objectives, Research Questions, and Research Contents
2.1 Objectives of the Study
(Write research objectives here)
The objectives of this study are:
i) To provide a holistic view by combining firms’ IT capabilities with other capabilities: coordination, systems, and socialization in a single study.
ii) To investigate the degree to which Chinese software firms are successful in maximizing their ability to absorptive capacity and competitive advantage by exercising combined capabilities.
2.2. Main Contents
The proposed framework of this study is based on four major constructs: IT capabilities, combinative capabilities, absorptive capacity, and competitive advantage. These constructs are explained briefly:
- 2.2.1. IT Capabilities
Based on the work of Wade and Hulland (2004), Roberts et al. (2012) conceptualize three different types of IT capabilities. These are outside-in, inside-out, and spanning capabilities. Outside-in capabilities are outward facing which help firms in building knowledge identification capability.
Inside-out are inward-focused capabilities that help firms in developing knowledge application capability. Whereas, spanning integrates the first two capabilities and helps firms in building assimilation and transformation capabilities.
- 2.2.2 Organizational Mechanisms associated with Different Combinative Capabilities
Justin et al. (2005) identify various organizational mechanisms associated with each combinative capability: coordination, systems, and socialization. The details of these mechanisms are below:
i) Coordination Capabilities: organizational mechanisms that facilitate coordination capabilities are cross-functional interfaces, job rotation, and participation in decision making
ii) Systems Capabilities: common features of these capabilities are formalization and routinization
- 2.2.3. Competitive Advantage
Competitive advantage measures the output or benefits received from a firm’s ability of absorptive capacity. Cohen and Levinthal assess competitive advantage by measuring firms’ flexibility, innovation performance, and business performance.
3. Research Program
3.1 Methodology and Data Collection
The population of the present study focuses on software firms (SFs) in China, which develops software and related services for external customers. There are multiple reasons for the selection of SFs. First, the Chinese software industry is rapidly growing.
According to the Ministry of Industry and Information Technology, the size of the software industry in 2011 hit a record of more than $60 billion, a 40% year-by-year increase (Yuan, 2012).
3.2 Technical Road Map of Research and Time Plan
The sample data will be collected from the managers of the software firms that achieved revenue of at least 100 million RMB. According to a survey, there are 984 software firms in China that achieved this benchmark. Purposive sampling technique will be applied as the aim is to collect expert opinions from the top management of each firm.
4. The novelty of this Research
As indicated in section 1.0, this research is novel as it fulfills the gaps identified by Jansen et al. The study combines IT capabilities with other organizational capabilities like coordination, control systems, and socialization in a single study.
Secondly, it adds a competitive advantage as a consequence of absorptive capacity in the frameworks proposed by both kinds of research. Finally, it empirically explores a mediating role of potential and realized absorptive capacity between capabilities and competitive advantage.
5. Possible Achievements
The study will have practical implications for Chinese software firms. It is hoped that the present study will provide a roadmap for successful investments in innovation projects. This roadmap will simplify the process of building absorptive capacities and developing new software according to the changing demands of market/ external customers.
Before undergoing a risky and costly project, the managers of SFS should emphasize on combined efforts of IT, coordination, systems, and socialization capabilities. These integrated capabilities make it easy to develop and maintain absorptive capacity and improve the firm’s innovation, flexibility, and overall performance.