Despite scholars’ early emphasis on the role people play in fostering firms’ absorptive capacity (AC), research has not deeply explored the individual-level antecedents of this important capability. We draw on adaptive-innovative theory to explain how top decision makers’ cognitive styles can influence the degree to which their firms develop AC. Top decision makers who have high adaptive cognitive style prefer to adhere to existing norms, follow established procedures, and rely on current knowledge, and we argue that these attributes will strengthen those dimensions of AC based on firms’ existing knowledge and knowledge-assimilation abilities. Top decision makers who have high innovative cognitive style are more likely to reframe information, experiment with new problem-solving approaches, and take risks by violating norms, and we argue that these attributes may strengthen those dimensions of AC based on firms’ acquisition of new knowledge and the assimilation of knowledge throughout the firm. We also argue that gender differences may moderate these effects. Empirical results support our hypotheses.
Microlending has become one of the primary interventions intended to alleviate poverty in the developing world. However, empirical results of the benefits of microlending have been disappointing. This article proposes the common microlending practice of group lending reduces the likelihood borrowers will engage in innovative activities, which has been demonstrated to be a key factor in improving borrower outcomes. The hypotheses proposed are tested with data collected from interviews with 340 microloan borrowers in Ethiopia. The findings are consistent with a weak sorting effect where innovative individuals are less likely to participate in group loans than individual loans, and a social pressure effect where innovative individuals taking group loans are pressured to behave less innovatively than their peers taking individual loans.
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