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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

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Absorptive Capacity: A New Perspective on Learning and Innovation

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  1. 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

  2. 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

  3. Cognitive Basis • Premise • Organization needs prior related knowledge to assimilate and use new knowledge • Individual level • ; • Organizational level BADM 545 presented by Yaxian Xie

  4. 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

  5. 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

  6. Absorptive Capacity and R&D Investment BADM 545 presented by Yaxian Xie

  7. 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

  8. 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

  9. 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

  10. 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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