Purpose: This study aims to investigate how relational resources, such as the buyer’s trust in its suppliers and the level of supplier involvement, affect the level of tacit knowledge integration capabilities (TKICs) of the firm, which, in turn, is hypothesized to affect business performance. Design/methodology/approach: Based on the dynamic capabilities theory and the relational view, this paper examines how TKIC, a special case of dynamic capability, influences business performance. The research context is the Brazilian automobile industry, in which firms are currently experimenting with modular production and increasing their interactions with suppliers. Using a sample of automobile suppliers, this investigates how relational resources, such as the buyer’s trust in its suppliers and the level of supplier involvement, affect the level of TKIC, which, in turn, is hypothesized to affect business performance. In addition, this paper examines the moderating effect of various communication media on the TKIC-business performance relationship. The findings confirm the importance of relational resources and TKIC on business performance. Finally, this paper explores various theoretical and managerial implications to encourage future research. Findings: The results suggested that the two relational resources (supplier involvement and buyer’s trust) are important drivers of TKICs and that the level of supplier involvement in the production process mediates the relationship between buyer’s trust and TKIC. Moreover, this study found that TKIC leads to superior firm performance, but the degree of media naturalness does not seem to facilitate knowledge transfer. The results confirm that supplier involvement is a pivotal process in that the buying firm’s internal resources and the major suppliers’ resources and capabilities are combined to achieve a competitive advantage – TKIC. Research limitations/implications: This study is subject to the typical limitations inherent in cross-sectional research designs using subjective measures. That said, this still has some important implications indicating that relational resources, such as buyer’s trust and supplier involvement, are critical in developing TKIC that “seize” opportunities from interfirm relationships and integrate knowledge across and within firm boundaries. Moreover, while knowledge management tools can resemble face-to-face interactions to the largest extent, the research suggested that it cannot substitute face-to-face communications in transferring tacit knowledge. Practical implications: Managers deal with complex interactions and linkages due to tacit knowledge from components, systems and modules, which are critical in developing organizational capabilities. Relational resources are important strategic assets facilitating resource combination and coordination. Managers must coordinate among multiple sources of learning and partner with their suppliers at an earlier stage to develop the relational capabilities and efficiently steer the process of boundary redefinition. Finally, managers must have the ability to manage tacit knowledge within the interface with suppliers using organizational mechanisms (i.e. TKIC) to help them absorb external knowledge from their supplier network and integrate it with specific internal competences. Social implications: Recent disruptive technological developments pressure organizations to become more flexible by requiring firms to adapt quickly to constantly changing markets and to have the ability to apply different resources and capabilities to specific unique situations. All this with a huge impact on the firm’s employees and society in general. Thus, interfirm relationships and the role of knowledge integration is especially crucial, given the current industry trend in favor of experimenting with innovative production methods (e.g. flexible manufacturing and modular production) that can help managers to rethink work conditions in a more meaningful and flexible for society. Originality/value: While prior research treats integrative capability mainly as a mechanism that explains superior firms’ performance in an interfirm relationship, few research efforts have explicated what shapes TKICs. By examining the relationship between relational resources, TKIC and performance, this study fills this research gap and develops and tests a theoretical framework.
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