Absorptive Capacity Theory

Absorptive capacity theory examines the extent to which a firm can recognize the value of new external information, assimilate it, and apply it toward achieving organizational goals (Cohen & Levinthal, 1989, 1990). The theory assumes that absorbing new knowledge can help an organization become more innovative and flexible and achieve higher levels of performance than it would without absorbing new knowledge. The theory also assumes that firms that have higher abilities for absorbing new knowledge will have a competitive advantage over firms with lower abilities.

A firm’s technical knowledge tends to come from four sources. (1) The firm conducts its own research and development (R&D). (2) The firm derives new knowledge ...

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