Six Sigma and Absorptive Capacity Affecting Firm Innovation and Performance

Abstract

It has become important to attain higher level of innovation as well as sustain good performance levels in dynamic industries. In fact, quality management programs in such industries matter most. Under the quality management umbrella, six sigma is normally supposed to aid companies improve their performance, but the empirical tests regarding how six sigma methodology affects innovation as well as firm performance through the mechanism of absorptive capacity are scarce. Furthermore, there is extremely little empirical testing of this idea concerning Pakistan’s construction sector which is a high paced growing sector and where six sigma, absorptive capacity, and innovation have become important strategic considerations. To fill this gap, this study obtained primary data from managers working in construction companies in Pakistan indexed by Pakistan Engineering Council and utilized SmartPLS 3.0 for analyses. On the basis of 73 companies’ data, this research reports that absorptive capacity fully mediates the relationship between six sigma and innovation, but it is partial mediator for six sigma and performance relationship. This study builds on and makes invaluable contribution to absorptive capacity and knowledge based view, and recommends managers in construction companies to employ six sigma methodologies to help improve on innovation and enhance companies’ performance.