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Encyclopedia of Technology and Innovation Management by Gina Colarelli O'Connor, V. K. Narayanan

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Chapter 20. Absorptive Capacity and Technological Innovation

Shaker A. Zanra[15], Bárbara Larraneta,[16] and J. Luis Galana[17]

Technological innovation is the foundation of competitive distinctiveness that gives the firm an advantage over its rivals, enabling it to achieve superior performance. Successful technological innovation requires the integration of multiple capabilities. These capabilities are usually grounded in knowledge-based routines (Helfat and Peteraf, 2003; Nelson and Winter, 1982). The knowledge used to develop these routines could be internally developed or acquired from external sources. The dynamism and complexity of today's competitive landscape often makes it essential for companies to use knowledge generated by other firms and institutions. Determining which types of knowledge to bring to the organization, how to best assimilate this knowledge, and how to exploit it for competitive advantage are important decisions that are shaped by recipient companies' absorptive capacity (Lane, Koka, and Pathak, 2006). Companies that do not have this capacity may not benefit from therich and varied information that exists in their industry and markets.

The concept and its dimensions

Absorptive capacity refers to the ability of a firm to "recognize the value of new external information, assimilate it and apply it to commercial ends" (Cohen and Levinthal, 1990). In recent years, definitions of absorptive capacity have highlighted its power in converting the knowledge gained ...

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