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The objective of this article is to analyze the relationship between absorptive capacity, entrepreneurial orientation, and performance within Brazilian federal state-owned companies.

Primary data were obtained using survey research. Secondary data were obtained using the Federal State-owned Companies Bulletin and the website State-owned Companies Overview. Tested and validated scales were selected to reflect Absorptive Capacity (ACAP), Entrepreneurial Orientation (EO), and Organizational Performance (OP) variables applied to a sample of 119 managers and advisors of federal state-owned companies. Structural Equation Modeling techniques were applied to identify the statistical significance of the direct, indirect, and total effects. The final measurement and structural model presented convergent and discriminant validity with acceptable adjustment indexes.

ACAP was found to be directly related to the ability to identify, recognize, transform, and especially implement new knowledge. EO is related to the institution’s ability to take risks, be proactive, and innovate. Those are fundamental processes for fulfilling the mission of state-owned companies, for their survival, and for improving the quality of public services provided to society. These findings differ from studies carried out in private companies since the ACAP-exploration dimension in private businesses displays a relevant relationship between the factors composing EO, a feature not observed here.

The paper’s main contribution is to confirm the influence of ACAP on EO and EO on OP, considering the environment of Brazilian federal state-owned companies. Such results expand the scarce academic studies on absorptive capacity, entrepreneurial orientation, and performance in the public area, in addition to offering perspectives of specific training direction to expand the competencies of public managers.