Absorptive Capacity in SMEs: A Comparative Study of the Financial and the Tourism Sectors in Malta

Abstract

Many modern economies are largely characterised by knowledge intensive service industries, constantly battling the ferociously competitive business environment. As a result, the management of a firm’s knowledge has become crucial in determining the sustainable competitive success of an organization. This research compares the knowledge management practices of service sector firms, particularly those service sector firms that are knowledge intensive, such as the financial services sector, and those that are less knowledge intensive, such as firms in the tourism sector. The study was conducted using a mixed methodology comprising in-depth face-to-face interviews and a qualitative survey. Structural Equation Modelling has been used to interpret the data collected from the survey. This study proposes a framework designed specifically to explain the absorptive capacity in service sector SMEs. The framework being presented (figure 9.2, p.404) shows how in small service sector firms, power relationships act as driving factors the internal and external processes and routines of the firm, which, in turn, shape ACAP, This analysis exposes seventeen points of interest, which identifies the Knowledge Management (KM) behaviour of firms in the tourism and in the financial services sectors and reveals eleven convergent practices across both sectors. The study proceeds to identify six divergent KM practices across the industries and a further three points wherein the firms in the financial services sector gave evidence of differing practices amongst themselves. The overarching conclusion from this study, however, is that the behaviour of SMEs is greatly influenced by their size, which, in turn dictates the extent of the influence and control which the owner exercises on the operation