The effect of social capital on exploratory and exploitative innovation: Modelling the mediating role of absorptive capability

The purpose of this paper is to advance new insights into how internal and external social capital (SC) facets influence exploratory and exploitative innovation directly, and indirectly through absorptive capability (AC), by drawing on the relational and knowledge-based views.

The paper empirically tests the developed model using 135 survey responses from managers in construction contractor firms. Data were factor analysed, and path estimates determined using partial least squares structural equation modelling to test the hypotheses.

The results reveal that each social capital (SC) facet has direct benefits for both exploratory and exploitative innovation. The findings also show a mix of full and partial mediation paths between the facets of SC and innovation types through AC.

Extant research linking SC facets with innovation categories is fragmented. Added to this fragmentation is the dearth of studies linking both intra-firm and inter-firm SC with exploratory and exploitative innovation in firms. This paper makes a novel contribution by testing a model of the direct and indirect links (through AC) between internal and external SC and both exploratory and exploitative innovation in the context of construction contractor firms. The findings show how both facets of SC are necessary for exploratory and exploitative innovation. It reveals the types of relationships and capabilities necessary for specific innovation objectives.