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absorptive

Absorptive capacity

In business administration, absorptive capacity is theory or model used to measure a firm's ability to value, assimilate, and apply new knowledge. It is studied on multiple levels (individual, group, firm, and national level). Antecedents are prior-based knowledge (knowledge stocks and knowledge flows) as well as communication. It is studied involving a firm's innovation performance, aspiration level, and organizational learning.

Absorptive capacity is also said to be a reason for companies to invest in R&D instead of simply buying the results (e.g. patents). Internal R&D teams increase the absorptive capacity of a company.

The theory was first introduced in 1990 by Cohen and Levinthal. It involves organizational learning, industrial economics, the resource-based view of the firm and dynamic capabilities. This theory has undergone major refinement, and today a firm's absorptive capacity is mostly conceptualized as a dynamic capability.

Two concepts related to absorptive capacity are:

  • Receptivity: The firm's overall ability to be aware of, identify and take effective advantage of technology.
  • Innovative Routines: Practised routines that define a set of competencies the firm is capable of doing confidently and the focus of the firm's innovation efforts.

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