Talent management, absorptive capacity, and firm performance: Does it work in China and Russia?

• Author: Marina Latukha,Anna Veselova
• DOI: http://doi.org/10.1002/hrm.21930
• Published date: 01 September 2019
• Date: 01 September 2019

SPECIAL ISSUE ARTICLE

Talent management, absorptive capacity, and firm

performance: Does it work in China and Russia?

Marina Latukha

1

| Anna Veselova

2

1

Organizational Behavior and HRM

Department, Graduate School of Management,

Saint-Petersburg State University,

St. Petersburg, Russia

2

Operations Management Department,

Graduate School of Management,

Saint-Petersburg State University,

St. Petersburg, Russia

Correspondence

Marina Latukha, Organizational Behavior and

HRM Department, Graduate School of

Management, Saint-Petersburg State

University, St. Petersburg, Russia.

Email: marina.latuha@gsom.pu.ru

This article investigates the relationship between talent management (TM), absorptive capacity

(AC), and firm performance. We build a theoretical framework and examine the mediating role

of a firm's AC in TM–performance relationships in the contexts of China and Russia. We use a

sample of 120 Chinese and Russian firms to provide empirical evidence of our hypotheses. Our

results show for both Chinese and Russian firms, a well-developed TM system positively influ-

ences a firm's ability to acquire, assimilate, and exploit knowledge as well as increase the overall

level of a firm's AC. We also found support for the argument that TM has an indirect positive

effect on firm performance through its AC; moreover, the effect is stronger for Chinese firms,

specifically, within the link between AC and performance.

KEYWORDS

absorptive capacity, China, firm performance, Russia, talent management

1|INTRODUCTION

An increasing demand for talented employees forces firms to look for

additional sources of competitive advantage that would allow for the

attraction, development, and retention of talent to ensure the imple-

mentation of their organizational strategies (Chambers, Foulon,

Handfield-Jones, Hankin, & Michaels, 1998; McDonnell, Collings,

Mellahi, & Schuler, 2017). Even though many researchers have already

considered the importance of talent management (TM) (Gallardo-

Gallardo & Thunnissen, 2016; Mäkelä, Björkman, & Ehrnrooth, 2010;

Mellahi & Collings, 2010; Skuza, Scullion, & McDonnell, 2013) and its

contribution to a firm's sustainable competitive advantage (Beechler &

Woodward, 2009; Farndale, Scullion, & Sparrow, 2010; Sparrow, Scul-

lion, & Tarique, 2014), TM alone may not be sufficient as it does not

directly address the issues connected with a firm's ability to efficiently

acquire and exploit external knowledge in its operations. Thus, a firm's

absorptive capacity (AC), or the ability to identify, assimilate, and

apply valuable knowledge (Cohen & Levinthal, 1990), becomes an

important objective for ensuring the competitiveness of an organiza-

tion (Cohen & Levinthal, 1990; Kostopoulos, Papalexandris, Papa-

chroni, & Ioannou, 2011; Lane, Koka, & Pathak, 2006; Zahra &

George, 2002).

In recent years, many authors have begun considering human

capital as the main source of a firm's AC (Hayton & Zahra, 2003;

Minbaeva, Pedersen, Björkman, & Fey, 2014; Mowery & Oxley, 1995;

Vinding, 2007). Minbaeva, Pedersen, Björkman, Fey, and Park (2003);

Minbaeva et al. (2014), for instance, suggest a firm's AC depends on

the interaction between employees' ability and employees' motiva-

tion, which in turn has a positive effect on knowledge transfer

between different units of the organization. Based on this, TM is also

expected to contribute to AC and, hence, to knowledge transfer. The

correlation between TM and firm performance (Chintalapati & Gopi-

nathan, 2009; Fey, Morgulis-Yakushev, Park, & Björkman, 2009; Latu-

kha, 2015; Muratovic, 2013) has already been analyzed; researchers

pay increasing attention to the creation and retention of competitive

advantage through TM and consider this to be of great importance

(Mäkelä et al., 2010; Mellahi & Collings, 2010; Skuza et al., 2013;

Wayne & Boudreau, 2016). Nevertheless, while human resource man-

agement (HRM) has been stated as having a positive impact on AC,

TM, in particular, is not yet linked to the ability of firms to acquire,

assimilate, transform, and exploit knowledge, which creates a new

research agenda.

Firms from emerging markets have become strong rivals that

change the global economy's competitive landscape; however, most

of them still lack strong managerial practices (Aulakh, 2007; BCG,

2011; Panibratov, 2012). Taking into account that a positive associa-

tion between a firm's TM and performance has been found by a num-

ber of studies (e.g., Chintalapati & Gopinathan, 2009; Fey et al., 2009;

DOI: 10.1002/hrm.21930

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Muratovic, 2013), the relevance of TM practices for emerging-market

firms is even higher. The integration of TM and AC in the context of

emerging markets brings new valuable insights into the nature of an

emerging-market firm's competitive advantage. While some emerging

markets, particularly India and China, are extensively researched,

others still lack a proper empirical study, especially a comparative one

(Cooke, Saini, & Wang, 2014; Iles, Chuai, & Preece, 2010). Specifically,

we see the need for some profound research of Chinese firms with a

Russian comparison as there are many similarities and differences

between both countries.

Thus, the main goal of this article is to identify the relationship

between a firm's TM, AC, and performance in an emerging-market

context. AC is expected to perform as a mediator in TM–performance

relationships, and a contextual specificity is considered as having a

moderating effect on these relationships. In particular, this article is

focused on China and Russia, considering that there is much in com-

mon: that is, their historical past, social foundations, and a relatively

long-term isolation from the rest of the world, but, at the same time,

they are very different in terms of institutional, cultural, and economic

settings, which might significantly affect the explored relationships.

2|PHENOMENON OF AC

The concept of AC has received considerable attention in recent liter-

ature (Flatten, Engelen, Zahra, & Brettel, 2011; Murovec & Prodan,

2009; Roberts, 2015; Roberts, Galluch, Dinger, & Grover, 2012; Vol-

berda, Foss, & Lyles, 2010). The term was introduced by Cohen and

Levinthal (1990), and according to them, AC relates to a firm's capabil-

ity to attract, assimilate, and use knowledge from the external envi-

ronment (Cohen & Levinthal, 1990). The research in the area of

knowledge management has eventually led to the conclusion that

effective management of internal knowledge stocks and flows is a key

determinant of value creation in organizations, meaning that an overall

ability to create and transfer knowledge is one of the main competi-

tive advantages of organizations with firm-specific knowledge ulti-

mately becoming a driver of performance (Grant, 1996; Kang,

Morris, & Snell, 2007; Kogut & Zander, 1992, 1993; Spender, 1996)

whereby HRM and TM play a significant role.

Particularly, after Cohen and Levinthal's definition, scholars have

continued analyzing the role of AC in organizational success, studying

how AC is connected with a firm's ability to effectively transfer

knowledge (Minbaeva et al., 2003), how AC influences innovative per-

formance (Lewin, Massini, & Peeters, 2011), and product and process

innovation (Murovec & Prodan, 2009). Effective internal knowledge

flows have been linked to innovation and new product development

(Hansen, 1999; Tsai, 2001; Tsai & Ghoshal, 1998), improved coordina-

tion processes and best practices (Kostova & Roth, 2002; Szulanski,

1996, 2000), and, ultimately, to a competitive advantage leading to a

better performance (Grant, 1996; Kogut & Zander, 1992, 1993; Spen-

der, 1996). Most importantly, it was stated AC is positively linked to

innovation and firm performance (Cohen & Levinthal, 1990; Kosto-

poulos et al., 2011; Tsai, 2001). It was found to be a key to a firm's

competitive advantage and survival (Lane et al., 2006; Zahra &

George, 2002).

2.1 |Multidisciplinary nature of AC

In terms of knowledge management, Cohen and Levinthal (1990)

defined AC as an ability to learn from external knowledge through

processes of knowledge identification, assimilation, and exploitation

(a by-product of an organization's research and development [R&D]

efforts). They assumed a firm's AC is path dependent and tends to

develop cumulatively, through building on existing knowledge

(Minbaeva et al., 2003). In comparison, Lane and Lubatkin (1998)

added an element of relativity to AC, determining it as the ability of a

receiver-firm to value, assimilate, and apply knowledge derived from

another sender-firm. They saw relative AC to be more important to

interorganizational learning than the commonly used measure of

absolute AC.

Lane, Salk, and Lyles (2001) refined this definition by clarifying

differences in understanding external knowledge, assimilation, and

application abilities. Meanwhile, in a later work, Lane et al. (2006)

focused specifically on transformational AC, which is identified as a

firm's ability to use knowledge from the external environment through

three sequential processes: (a) recognition and understanding of new

potentially valuable external knowledge through exploratory learning;

(b) assimilation of valuable new knowledge through transformative

learning; and (c) use of knowledge to create new knowledge and com-

mercial outputs through exploitative learning.

Another very important and clear definition was given by Zahra

and George (2002), who added more “dimensions”to the concept by

identifying potential and realized AC. Potential AC makes a firm

receptive to acquiring and assimilating external knowledge, whereas

realized AC is a function of transformation and exploitation capabili-

ties. Both, potential and realized, form dynamic AC, which can be

identified as a combination of organizational practices and processes

by which a firm acquires, assimilates, transforms, and exploits knowl-

edge. In this four-dimensional model, knowledge acquisition relates to

the organizational capability to identify and acquire externally gener-

ated knowledge, which is crucial for a firm's business processes and

performance (Zahra & George, 2002). Assimilation, in turn, refers to

the routines of a firm, which allow it to analyze, process, and interpret

information obtained from external sources (Szulanski, 1996). As for

transformation, it denotes a firm's capability to develop and refine the

routines, which facilitate combining existing knowledge and newly

acquired and assimilated knowledge, while exploitation is basically the

capability of a firm to apply newly acquired knowledge in products or

services from which it can get financial benefits (Zahra & George,

2002). According to the authors, knowledge transformation and

exploitation (realized capacity), in particular, allow firms to sustain a

competitive advantage in a dynamic industry context, influencing

organizations' performance, flexibility, and innovation capabilities.

In contrast to Zahra and George (2002), Cohen and Levinthal

(1990) determined only three dimensions of AC, which are: (a) value

recognition (the ability to value knowledge through past experience

and investment); (b) assimilation (the ability to assimilate knowledge,

based on knowledge characteristics, organizational or alliance dyad

characteristics, and a technological overlap); and (c) commercialization

(the ability to apply knowledge, based on a technological opportunity,

and the ability to protect innovation [appropriability]). Kim (1998)

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