Technology Transfer, Technological Capability, Absorptive Capacity and Firm Performance: An Investigation of the Textile and Clothing Firms in Pakistan

Research on the web of technological linkages that stimulate firm performance is still evolving, especially when they differ with industry, timing and location. Generally, firms in emerging nations need technologies to build technological capabilities; however in some cases firms are limited in their capacity to acquire the technology because of their low level of absorptive capability. The rising share of resource-based textile exports, which exceeds clothing exports, demonstrate that little or no functional upgrading has taken place in the clothing and textile industry of Pakistan. Hence, using structural equation modeling we examine in this paper the mediating effect of absorptive capacity on the relationship between technological capabilities and technology transfer, and firm performance in a sample of 503 textile and clothing firms in Pakistan. The results show that, absorptive capacity mediates positively and significantly the relation between technology transfer, technological capabilities and firm performance with the former being stronger than the latter.