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Absorptive Capacity: A New Perspective on Learning and Innovation. Wesley M. Cohen Carnegie Mellon University (at Duke now) Daniel A. Levinthal University of Pennsylvania

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absorptive capacity a new perspective on learning and innovation

Absorptive Capacity: A New Perspective on Learning and Innovation

Wesley M. Cohen

Carnegie Mellon University (at Duke now)

Daniel A. Levinthal

University of Pennsylvania

Administrative Science Quarterly, Vol. 35, No. 1, Special Issue: Technology, Organizations, and Innovation. (Mar., 1990), pp. 128-152.

BADM 545 presented by Yaxian Xie

absorptive capacity ac
Absorptive Capacity (AC)
  • Definition
    • the ability of a firm to recognize the value of new, external information, assimilate it and apply it to commercial ends;
    • Firm level
    • Prior related knowledge matters
  • Develops as
    • Byproduct of R&D investment;
    • Byproduct of manufacturing operations;
    • Direct investment;

BADM 545 presented by Yaxian Xie

cognitive b asis
Cognitive Basis
  • Premise
    • Organization needs prior related knowledge to assimilate and use new knowledge
  • Individual level
    • ;
  • Organizational level

BADM 545 presented by Yaxian Xie

path d ependence and absorptive capacity
Path Dependence and Absorptive Capacity
  • Absorptive Capacity  Innovative Performance
    • Cumulativeness
    • Expectation formation
  • Extreme case of Path Dependence: “Lockout”
    • Initial investments in AC matters;
    • Absorptive Capacity influences organizations’ aspiration levels

BADM 545 presented by Yaxian Xie

absorptive capacity and r d i nvestment
Absorptive Capacity and R&D Investment

Characteristics of Knowledge

Factors affecting learning incentives

= Factors affecting AC

Ease of Learning

BADM 545 presented by Yaxian Xie

absorptive capacity and r d i nvestment1
Absorptive Capacity and R&D Investment

BADM 545 presented by Yaxian Xie

methods
Methods
  • Data
    • Cross-sectional survey data: Technological Opportunity (TO) and Appropriability conditions
    • Secondary data: Sales, transfers and R&D expenditures
    • Sample: 1719 business units representing 318 firms
  • Measures
    • TO:
      • relevance or importance of the science base of the industry and extra-industry sources of knowledge
    • Appropriability (-spillover)
      • The effectiveness of six mechanisms used by firms to capture and protect the competitive advantages of new processes and new products
    • Ease of Learning
      • Dummy variable (1: relevance to basic fields>applied fields)
    • Interdependence
      • Industry competitiveness

BADM 545 presented by Yaxian Xie

results part
Results (part)
  • TO
    • Basic fields > applied fields
    • Extraindustry sources: more important
  • Appropriability
    • Learning environment matters;
    • Moderating effect of competitor interdependence

BADM 545 presented by Yaxian Xie

implications for innovative activities
Implications for Innovative Activities
  • Investments in basic research
    • R&D  Absorptive Capacity (critical overlap in knowledge base)
  • Adoption and diffusion of innovations
  • Cooperative research ventures
    • More in industries with mature technology
    • More pressure on short-term objectives

BADM 545 presented by Yaxian Xie

conclusions
Conclusions
  • R&D investments are responsive to the need to develop AC;
  • Characteristics of learning environment matter to R&D investments
    • Absorptive Capacity  resource allocation for innovative activity
  • Further Question
    • When is a firm most likely to underinvest in AC to its own long-run detriment?

BADM 545 presented by Yaxian Xie

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