Absorptive capacity
DESCRIPTION
A conceptual term characterizing a firm’s ability to recognize value in information arising outside the firm, internalize and assimilate such information, and apply it for commercial purposes.
KEY INSIGHTS
According to research on the concept of absorptive capacity by Cohen and Levinthal (1990), absorptive capacity as a capability is critical in supporting firms’ innovation capabilities and successful innovation processes within firms. In terms of explaining what determines the extent of a firm’s absorptive capacity, Cohen and Levinthal (1990) argue the capability is driven to a large extent by the firm’s level of related prior knowledge.
KEY WORDS External information, knowledge, innovation, learning
IMPLICATIONS
For those managing innovation within firms, a major implication of the concept is that a greater absorptive capacity capability will lead to strengthened innovation capabilities and a higher likelihood of successfully
developing innovations. As such, individuals throughout a firm should strive to develop essential skills and a shared language of related knowledge to be able to more readily identify and comprehend developments outside the firm and assimilate such knowledge with the aim of establishing and pursuing appropriate commercial applications. Having a strong internal R&D capability and conducting the firm’s R&D internally can, for example, help to prepare a firm to make better use of external information as part of strengthening the firm’s absorptive capacity.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Johnson, Jean L., Sohi, Ravipreet S., and Grewal, Rajdeep (2004). ‘The Role of Relational Knowledge Stores in Interfirm Partnering,’ Journal of Marketing, 68(3), July, 21–36.
Hurley, Robert F., and Hult, G. Tomas M. (1998). ‘Innovation, Market Orientation, and Organizational Learning: An Integration and Empirical Examination,’ Journal of Marketing, 62, July, 42–54.
Van den Bosch, Frans A. J., Volberda, Henk W., and de Boer, Michiel (1999). ‘Coevolution of Firm Absorptive Capacity and Knowledge Environment: Organizational Forms and Combinative Capabilities,’ Organization Science, 10(5), September– October, 551–568.
Lane, Peter J., and Lubatkin, Michael (1998). ‘Relative Absorptive Capacity and Interorganizational Learning,’ Strategic Management Journal, 19(5), 461–477.
International Marketing
Lane, Peter J., Salk, Jane E., and Lyles, Marjorie A. (2001). ‘Absorptive Capacity, Learning, and Performance in International Joint Ventures,’ Strategic Management Journal, 22(12), 1139–1161.
BIBLIOGRAPHY
Cohen, Wesley M., and Levinthal, Daniel A. (1990). ‘Absorptive Capacity: A New Perspective on Learning and Innovation,’ Administrative Science Quarterly, 35, 128–152.