**2.3. Absorptive capability and competitive advantages in BGs**

channels and customer bases [61] and to improve other knowledge-related aspects such as information exchange and coordination [62] and the speed of know-how and technology transfer [63]. Thus, networks are key for BGs to develop a broader knowledge base beyond what they could achieve alone [64], abandoning the idea that the generation of new knowledge is a purely internal process [19, 25, 56, 65]. This is particularly so if we bear in mind that BGs are

The processes that contribute to relational information management in adopting an NMO are presented in the theoretical proposal of Helfert et al. [37]. These authors define four relational knowledge management mechanisms developed jointly by the members of a network: knowledge exchange processes, in order to satisfy clients' requirements; coordination processes, aimed at synchronising the network ties through formal and informal routines; coupling processes, necessary to adapt the particular features of a network member and conflict resolution mechanisms designed to solve unexpected contexts. The work of Helfert et al. [37] represents a significant step forward in the study of this construct. In fact, previous research was limited to considering the sum of market orientations in individual companies [66] or adapting the

original market orientation models (behavioural and cultural) to the network setting.

Following the work of Helfert et al. [37], Monferrer et al. [22:p.388] defined NMO as 'a strategic orientation established jointly by the different members in the business relations network. This strategic orientation involves, in a climate of trust, collaboration and commitment, engaging in certain activities and fundamental shared behaviours (adaptation, coordination, conflict resolution and exchange) based on the generation of an extended intellectual capital'. These activities seek to increase the competitiveness of the network and its individual members in an attempt to provide superior value to end customers by satisfying their needs.

Absorptive dynamic capability is related to the processes developed in the company to seek new information, internalise it and integrate it into the firm's existing knowledge base [49]. Developing this capability is vitally important for BGs' survival, since their business opportunity has not yet been consolidated. Furthermore, given that BGs compete in a global market segment [2, 3], the nature of the factors that influence the conditions of their business environment come from a greater diversity of sources. This variety of sources has the effect of increasing the complexity associated with the mechanisms BGs need to generate in order to manage and internally integrate knowledge from their external markets. For this reason, before developing new knowledge search and integrative mechanisms, firms must stimulate the use of processes that allow original knowledge from different sources to be managed

BGs are recently created companies and therefore they assume limited resource availability [5, 6, 8, 14, 17, 67]. In these circumstances, networks facilitate the development of absorptive capability in BGs [68]. Nahapiet and Ghoshal [69] indicate that to access the different sources of knowledge from their external markets, firms need to generate communication processes in order to guarantee the capture and integration of real and potential capabilities and resources associated to the relationships an individual unit builds through its network.

characterised by their lack of necessary resources.

50 Knowledge Management Strategies and Applications

**2.2. NMO and absorptive capability in BGs**

efficiently [22, 48].

To specify these competitive advantages, we are guided by the work of Porter [70], who considers that the different meanings used to refer to competitive advantages can be condensed into two general ones which cover all the rest [13, 71–73]: product differentiation-based and cost-based competitive advantages. The former refers to factors such as quality, design and other attributes that distinguish firms' offers of value from those of their rivals [70–72], as well as advantages linked to services such as delivery speed, reliability and managing additional services [40, 72, 73]. In turn, cost-based advantages lie in the domain of manufacturing, administration and commercialisation costs. They give the producer value in the form of lower costs and offer the consumer the lowest price [40, 70, 72, 73].

Regarding the influence that absorptive capability has on these advantages, Cohen and Levinthal [49] argue that establishing practices which encourage the assimilation of external knowledge creates a positive incentive to invest in R&D and thus improve the firm's possibilities of achieving superior competitive advantages. According to Ref. [74], improving the differential nature of a new company requires (1) the internal application of certain valuable knowledge-based resources and capabilities; (2) the skill to associate them with other external ones; (3) the capacity to integrate the knowledge derived from this association internally and (4) the capability to apply this knowledge to potentially successful business aims. As Laursen and Salter ([75], p.146) manifest 'the lack of openness of firms to their external environment may reflect an organizational myopia, indicating that managers may overemphasize internal sources and under emphasize external sources'. An excessively internal vision may therefore negatively influence the competitiveness of the firm [49]. To encourage firm competitiveness, ideally there should be a balance between the concentration of internal capabilities and openness to the exterior [76]. In this regard, Vinding [77] extols the role of absorptive capability, as it enables the firm's internal capability and its external collaboration to complement each other. On the basis of this capability firms manage to capture, absorb and use external knowledge, thereby facilitating the achievement of competitive advantages [22, 78–80].

BGs tend to gradually define the specifications of their products or services by taking into account the particularities of their customers and the conditions that characterise their competitive environment [22]. BGs thus need to avoid internal short-sightedness when specifying market trends in differential and low cost products or services [3, 22, 81]. Therefore, BGs use the information and knowledge generated on the basis of their absorptive capability to introduce the valuable specifications and features required in their products or services to guarantee the feasibility of their business project. These arguments lead us to propose that:

*H2: Greater absorptive capability in BGs leads to greater development of differentiation-based competitive advantages*.

*H3: Greater absorptive capability in BGs leads to greater development of cost-based competitive advantages*.
