Abstract

This study explores a mechanism and contingencies in the relationship between potential absorptive capacity and realized absorptive capacity. Companies’ environments are becoming more uncertain in modern days which makes it necessary for these companies to continuously acquire knowledge from the external environment, exploit useful knowledge, and discard existing redundant knowledge. To achieve this, organizations proactively seek and apply externally acquired knowledge by unlearning old knowledge and beliefs. In this study, Potential absorptive capacity will lead to realized absorptive capacity through the relationship of organizational unlearning. Learning orientation positively moderates the relationship between potential absorptive capacity and organizational unlearning. The relationship between organizational unlearning and realized absorptive capacity is moderated positively by internal relational embeddedness. This is a quantitative study based on 285 companies in the knowledge-intensive industry of Pakistan i.e., the pharmaceutical industry. Smart pls is used for analysis This study suggests that knowledge-intensive companies like those of the pharmaceutical industry need to develop a culture where external knowledge is continuously acquired and put into practice while unlearning old knowledge that does not remain suitable for changing environments. Employees should be encouraged to collaborate to recognize the value of new knowledge and unlearn old knowledge and habits so that organizations can exploit useful knowledge to adjust to the changing environments.