Research problem: Organizations are increasingly investing in virtual customer communities that reduce communication barriers between organizations and customers. However, little is known regarding how virtual customer communities might affect a firm's learning and innovation activities. Research question: What effects do virtual customer communities have on the relationship between absorptive capacity and organizational innovation? Literature review: Research has shown that virtual customer communities promote knowledge creation and knowledge sharing by facilitating communication within a virtual customer community. We investigate the extent to which interactivity in virtual customer communities influences the relationship between a firm's absorptive capacity (the ability to identify, assimilate, and apply external knowledge) and the extent to which a firm develops incremental and radical innovations. Methodology: We test this model with a quantitative survey-based research design that involves 102 firm-sponsored virtual customer communities. We use hierarchical regression techniques to test our hypotheses. Results: Absorptive capacity is positively related to incremental innovation and negatively related to radical innovation. Furthermore, virtual customer community interactivity moderates the relationship between absorptive capacity and incremental innovation. Conclusions: Virtual customer communities are transforming communication relationships between organizations and customers in ways that influence a firm's learning and innovation activities. One limitation of our study is the use of a single respondent for our survey. We recommend that future research examine how virtual customer communities affect organization-customer communication channels.