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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