When does absorptive capacity matter for international performance of firms? Evidence from China

While learning plays an important role in firms’ internationalization process, the impact absorptive capacity has on the international performance when considering the timing of the internationalization is still unclear. Our research explores the role of absorptive capacity in international performance of early internationalizing firms and international experienced firms. Combining established theories, we propose opposing effect of absorptive capacity as the learning advantages of newness vanish over time and are replaced by organizational rigidities and inertia. Based on survey data from 162 Chinese firms, our empirical results indicate that the influence of absorptive capacity on international performance becomes stronger when the firm enters foreign market in its earlier stage of life cycle. However, we find that as the learning advantages of newness diminish, so does the effectiveness of high levels of absorptive capacity. Absorptive capacity resources become captured by organizational and operational rigidities and contribute less to firm performance.