An investigation on the effects of organizational memory and human capital on innovation and absorptive capacity

Article history: Received December 28, 2013 Received in revised format April 15 2014 Accepted April 3


Introduction
Innovation is considered as enabling essential tools for creating value and sustainable competitive advantage for organizations in very dynamic environment of our times along with its ever-increasing complexities (Subramaniam & Youndt, 2005).Organizations with more innovation power are more successful responding to dynamic environments and creating new capabilities for business development (Montes et al., 2004).The innovation start point is highly dependent on knowledge, expertise, and human commitment as the main inputs of value creation and innovation process.As innovation in developing countries needs more capital and talents, the human capital (HC) is a key factor of innovative performance and it plays a determinant role in absorption and adaptation of overflowing technology through merchandise import, direct foreign investment input flow, and consequently development of innovative activities (Ping & Qingchang, 2008).People are considered as the most important factor of exploitation of foreign knowledge; and knowledge focus in business environment is highly dependent on external information sources in order to develop innovation and improve performance of the company (Morgan & Berthon, 2008).Organizational memory (OM) is another element apart from human capital, which leads to organizational innovation.
Organizations usually do not remember the reasons for their past deeds.Every organization has to gather three kinds of information continuously in order to survive.Some of these types of information include information about its surrounding environment, about its past, and finally information about internal parts and constituent elements of itself (Sadoughi et al., 2011).
Although organizations are in fact the formal or informal mechanisms intended for gathering, keeping, and using other resources (Miller & Nilakanta, 1997), they are facing problems finding suitable equipment to acquire, to create, to transmit, and to use intellectual capital.The knowledge existing in employees' brains, in information systems and existing in organizational culture are the most valuable assets of the organizations (Sadoughi et al., 2011).
Studies have shown that although importance level of knowledge is increased, but only 30 percent of existing knowledge is being used within organizations (Lehner & Maier, 2000).Expensive but evitable mistakes may happen due to information blockage; and the risk of losing knowledge is exceptionally higher when people leave the organization.Another study has shown that 74 percent of respondents believe the best parts of knowledge in organizations are inaccessible and 68 percent think that mistakes keep happening (Alavi & Leidner, 2001).This study therefore, intends to examine the effect of OM and HC on innovation through evaluation of intercession role of knowledge absorption.Leal-Rodríguez et al. (2014) studied the relationship between potential of ACAP on innovation through evaluating the intercession role of absorption capacity in the field of relational learning.The study was conducted with 110 project team managers of car parts manufacturers in Spain.They concluded that sheer recognition of ACAP plays an intercession role in relationship between potential ACAP and innovation outputs.Rahmanian and Nasr (2008) addressed the potential absorption capacity from two dimensions of inception and absorption in their study about creating absorption capacity for organizing open innovations in small and medium size industries of Markazi province, Iran.Their research findings showed that ability of experts and competence of human personnel was an important factor, which influences on potential absorption capacity.They also stated that education and improvement of HC should be addressed first in order to develop ACAP.Some other people examined the effect of internal and imported research and development and HC on innovation in China over the period 1990-2005 period.Research results suggested that although the effect of international technology propagation on innovation was not negligible, but stack of internal research and development activities act as the innovation engine for China.Gray (2006) examined the capacity of small entrepreneurial companies for knowledge absorption and management since he believed that capacity of knowledge absorption and management was a prerequisite of success in innovation and entrepreneurial grows.Camison and Lopez (2011) studied the role of OM and learning capabilities on non-technological innovation improvement and achieving sustainable competitive advantage.They conducted their study in Spanish manufacturing firms and concluded that the stronger OM, the faster it achieves (organizational and marketing) innovation and competitive advantage, the faster it leads to better performance for organization.Hoseini and Hajipour (2008) addressed the subject of stating common mind relationships, ACAP, innovation and flexibility of medicine companies.They concluded that common perspective of HC will directly influence the ACAP through a direct and significant relationship.

Organizational memory
Walsh and Ungson (1991) stated OM as a concept in details and many researchers have worked on it since then; and some kind of confusion has been created about how to use this concept (Heijst, 1996).There are literally various definitions for OM, such as: knowledge is a key capital for organizations.OM develops and reinforces the knowledge created by company personnel through inception, organization, propagation and reusing that knowledge (Conklin, 1996).Mechanisms of OM are supposed to acquire and to preserve the knowledge inside an organization while making it retrievable and reusable (Dzbor & Paralic, 2000).This study uses indices of communications, adding to knowledge, and environmental adaptation to evaluate this variable.

Human Capital at Firm level (Firm-Level HC)
Unique level and configuration of supplementary characteristics of employees are suitable for satisfying customer demands and acquiring economic value along with organizational value and goals.Quantity, congruence, complementarity, and specificity are considered as four dimensions of HC at firm level.Firm-level HC is evaluated and examined through the mean value of quantities namely: Quantity of Human Capital, HC-organization congruence, complementarity among HC, and specificity of HC (Rahimi, 2010).

Absorption capacity (ACAP)
ACAP is the ability of a particular company to evaluate and to use external knowledge from firm's environment, i.e. higher absorption capacity including more training, employee expansion and intention towards technology causes better organizational performance (Colin, 2006;Zahra & George, 2002).ACAP includes configuring processes and procedures used by the firms to accumulate, to absorb, to transfer, and to implement knowledge.Absorption capacity is measured in that research by same previous indices associated with organization business, communication atmosphere, environment scanning methods and R&D.

Innovation
Innovation is the process of translating knowledge into economic growth and social improvement.It includes a set of scientific, technological, organizational, financial and business activities.Innovation emerges in societies as the process of introducing and commercializing products or services, or fundamental improvement of existing processes, opening doors of new markets, and developing new supply resources such as raw materials, equipment, and other inputs, and fundamental changes in industrial and organizational structures.Innovation plays a determinant role in economic growth and development (Puga & Trefler, 2010).

Research Hypotheses
According to the above hypotheses and research model is mentioned as follows.
Hypothesis 1: OM has significant effect on ACAP.
Hypothesis 2: OM has significant effect on innovation.
Hypothesis 3: HC in the firm level has significant effect on ACAP.
Hypothesis 4: HC in the firm level has significant effect on innovation.
Hypothesis 5: ACAP has significant effect on innovation.