Depth and breadth of external knowledge search and performance: The mediating role of absorptive capacity José Luis Ferreras-Méndez a, ⁎, Sue Newell b,1 , Anabel Fernández-Mesa a,2 , Joaquín Alegre a,1 a University of Valencia, Dpt. of Management ‘Juan José Renau Piqueras’, Faculty of Economics, Av. Naranjos, s/n., Valencia 46022, Spain b University of Sussex, Dpt. of Business and Management, Sussex House, Falmer Brighton, BN1 9RH, United Kingdom abstract article info Article history: Received 15 February 2013 Received in revised form 1 September 2014 Accepted 2 October 2014 Available online xxxx Keywords: Breadth Depth Absorptive capacity Innovation Performance Nowadays it is commonly accepted that exploiting external knowledge sources is important for firms' innovation and performance. However, it is still not clear how this effect takes place and what internal capabilities are involved in the process. We propose to open the black box between external knowledge search strategies, and innovation and performance by proposing absorptive capacity (AC) as the mediating variable. A sample of 102 biotechnology firms from Spain is used to test the proposed theoretical model through structural equation modeling taking the partial least squares approach. Results suggest that AC acts as a full mediator in the relationship between the depth of external knowledge search and the innovation and business performance of the firm. Finally, some suggestions for managers and future lines of research are highlighted. © 2015 Elsevier Inc. All rights reserved. 1. Introduction A central part of the innovation process concerns the way firms go about organizing their search for new ideas that have commercial potential (Laursen & Salter, 2006). While a firm's innovation capability may depend on its existing knowledge base, firms also rely on external relationships and networks in order to access knowledge located outside their boundaries or to find sources for knowledge variety that facilitate the creation and combination of new technologies (Cockburn & Henderson, 1998; Martín-de Castro, Delgado-Verde, López-Saez, & Navas-López, 2011). This openness to external knowledge sources has been defined as ‘open innovation’ and involves the use of a wide range of external actors and sources to help firms obtain the knowledge they need for their innovation processes (Chesbrough, 2003). While the influence of firms' openness on their performance repre- sents an interesting research field, most of extant literature assumes a direct relationship between external knowledge search and perfor- mance (Foss, Laursen, & Pedersen, 2011). In a recent study, Laursen and Salter (2006) suggest absorptive capacity (AC) as a complementary factor to external knowledge search. Scholars in the literature on AC and organizational learning suggest that simple acquisition of external knowledge does not imply successful application (Lane, Koka, & Pathak, 2006); rather, firms need to possess the mechanisms that allow them to retain, reactivate and apply the new knowledge in their products and processes (Chen, Lin, & Chang, 2009; Lewin, Massini, & Peeters, 2011). Although Laursen and Salter (2006) drew on Cohen and Levinthal's (1990) research and suggested AC as a complementary factor to external knowledge search breadth and depth in shaping innovation performance, they assessed AC as a one-dimensional concept and used R&D intensity as a proxy to measure it. However, the appropriateness and validity of R&D as a proxy of AC has been questioned, given that the empirical evidence is inconsistent and it does not capture AC as a dynamic capability (Lane et al., 2006; Zahra & George, 2002). Authors therefore recommend considering the multidimensional nature of AC when analyzing the concept instead of assuming it to be unidimensional (Lane et al., 2006: 857; Volberda, Foss, & Lyles, 2010). According to its process-based definition, AC represents a dynamic capability which confers firms with the ability to recognize, assimilate and apply exter- nally held knowledge through three sequential processes, namely, exploratory, transformative and exploitative learning (Lane et al., 2006: 856). Thus, the main contribution of this paper is to investigate the role of the multidimensional learning-based AC construct in the external “knowledge search — innovation/performance relation”. This investiga- tion implies identifying the organizational learning processes of AC in the context of firms' openness and how their complementarity provides a better understanding of interfirm discrepancies in benefitting from Industrial Marketing Management xxx (2015) xxx–xxx ⁎ Corresponding author at: Department of Management, Catholic University of Murcia, Av. Jerónimos s/n, Guadalupe 30107, Murcia, Spain. Tel.: +34 963 983376; fax: +34 963 82833. E-mail addresses: jlferreras@ucam.edu, j.luis.ferreras@uv.es (J.L. Ferreras-Méndez), sue.newell@sussex.ac.uk (S. Newell), anabel.fernandez@uv.es (A. Fernández-Mesa), joaquin.alegre@uv.es (J. Alegre). 1 Tel.: +34 963 983376; fax: +34 963 82833. 2 Tel.: +34 963 864438; fax: +34 963 82833. IMM-07143; No of Pages 12 http://dx.doi.org/10.1016/j.indmarman.2015.02.038 0019-8501/© 2015 Elsevier Inc. All rights reserved. Contents lists available at ScienceDirect Industrial Marketing Management Please cite this article as: Ferreras-Méndez, J.L., et al., Depth and breadth of external knowledge search and performance: The mediating role of absorptive capacity, Industrial Marketing Management (2015), http://dx.doi.org/10.1016/j.indmarman.2015.02.038