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This research investigates the impact of the internal social network on new venture’s innovation by building a comprehensive structural equation modeling (SEM) that integrates three streams of research: internal social network, innovation, and absorptive capacity. Based on a sample of 279 new ventures from China, the current study’s results show that absorptive capacity plays a full mediating effect in the relationship of the internal social network and innovation. Particularly, among the skill set of absorptive capacity, a mere skill of knowledge acquisition does not guarantee an enhancement of new venture’s innovation. For new ventures to better utilize the social capital generated by the internal network in the process of innovation, they must focus more on the skills of knowledge digestion and knowledge application. The authors further separate the new ventures into two different sub-samples: the new venture supported by mature enterprises (M-type) and the independent new venture (I-type). This study’s findings indicate that the effect of the social network on innovation through knowledge digestion is greater in the M-type sample than in the I-type sample; internal social network heterogeneity in general plays a less important role in improving a new venture’s innovation than internal social network density, for both M-type and I-type new ventures.

Internal Social Network, Absorptive Capacity and Innovation: Evidence from New Ventures in China