The interrelationships between entrepreneurial competencies, absorptive capacity and innovation capacity

Abstract

Speed and measure of the fourth industrial revolution (Industry 4.0) is bringing about shifts in power, wealth and knowledge. For entrepreneurs, who are known to drive innovation, Industry 4.0 offers a wide scope of opportunities in the future. As a middle-income country, South Africa needs to use its knowledge and innovations to sharpen its innovative edge in order to compete globally and stimulate innovation. Hence, this research attempts to determine the relationships between entrepreneurial competencies, entrepreneurial absorptive capacity and innovation capacity. Three conceptual frameworks of the interrelationships between these constructs were synthesised from the literature. As ample research on entrepreneurial competencies is widely available, a Delphi study was employed, together with a concept matrix to determine which entrepreneurial competencies should be included specifically significant for innovation within the 4IR context in South Africa. Four entrepreneurial competency categories emerged: cognitive (knowledge), functional (skills), social (attitudes and behaviours) and meta (facilitating learning) categories. Using a survey method, the analysis on a sample of 452 innovative entrepreneurs in South Africa was mainly done by empirically testing the causal linear relationship through structural equation modelling (SEM). Furthermore, an Artificial Neural Networking (ANN) technique which tests non-linear relationships and develop pattern recognition as well as modelling was conducted to compare the results of a non-linear relationship with those of a linear relationship. However, explorative comparisons of the performance of linear SEM models with non-linear NN indicated that the SEM models in this case performed better in explaining the variance in the dependent variables than did the ANN. Through the theories of innovative performance, person-entrepreneurial fit and knowledge spillover, the findings of the study indicate the importance of incorporating a unified entrepreneurial competency typology perspective on innovation. The cognitive, functional, social and meta competencies as well as entrepreneurial absorptive capacity are significant predictors of innovation capacity. The implications of this extend to transmitting knowledge through absorptive capacity, which allows entrepreneurs to identify and exploit opportunities, identified from new knowledge sources and incorporated into new innovations. Additionally, entrepreneurial absorptive capacity mediates the relationship between social, meta, and functional competencies and innovation capacity. Entrepreneurial absorptive capacity was also found to be a moderator between cognitive competencies and innovation capacity. Therefore, the development of certain entrepreneurial competencies, significant for innovation, is crucial for improving the strength of the relationship between entrepreneurial absorptive capacity and innovation capacity of entrepreneurs. These results have important implications for Industry 4.0 entrepreneurs, educators, policy makers as well as entrepreneurship models.