Given the large investment and prevalence of knowledge management (KM) in organizations, it has
become important to analyze the effects of KM activities on organizational performances. A theoretical framework
is proposed to investigate the impact of KM activities on innovation capabilities in the IT service
industry. This study considers KM activities as the major determinant that enhances absorptive capacity.
KM activities enhance employees’ability to obtain external knowledge, resulting in increasing intellectual
capital. Thus, this study proposes that absorptive capacity plays a mediating role between KM activities
and innovation capability. Additionally, this study investigates the key antecedents of KM activities that
promote employees’ knowledge sharing. Based on prior studies on KM, this study posits KM team activities
and top manager support as KM activities. The proposed research model was tested by using survey data
collected from 556 employees in the IT service industry. PLS (partial least squares) was employed for the
analysis of the data. The findings of this study showed that KM activities and absorptive capabilities play
a significant role in enhancing service innovation and process innovation in the IT service industry. The
results also shed light on the mediating role of absorptive capacity between KM activities and innovation
capability. Moreover, both KM team activities and top manager support serve as the salient antecedents
of promoting employees’ knowledge sharing.