Absorptive Capacity

Course: Contemporary Theories on B&M

Dhr. F. Noseleit

June, 2015
Words: 1345
1.Conciselyandcriticallyreviewthethemeliterature

AbsorptiveCapacityhasbeenusedattheorganizationalleveltoanalyzeinnovation
processes,andalsotoanalyzetheeffectoforganizationallearningonsustainablecompetitive
advantage.ThefirstbroaddefinitionofabsorptivecapacitycomesfromCohen&Levinthal.
Theydefineabsorptivecapacityasafirmsgeneralabilitytovalue,assimilateand
commercializenew,externalknowledge(Cohen&Levinthal,1990).
Absorptivecapacityhasgonethroughadevelopmentprocessinthepastyears.Accordingto
thethemeliteraturewewilldemonstratethedevelopmentprocess.

StartingwithFiol&Lyles(1985),theirpaperisaboutorganizationallearning.Theliterature
onabsorptivecapacitydifferentiatesbetweenlearningatindividuallevelandthe
organizationallevel.Therearedifferentlevelsoflearning,andeachlevelhavingadifferent
impactonthestrategicmanagementofthefirm(Fiol&Lyles,1985).Individuallearningis
importanttoorganizations,becauseorganizationslearnviatheirindividuals.Wecanconclude
organizationallearningisnotthesumofeachmemberslearning,italsoincludesthe
developmentoforganizationalmemory.

Thesecondarticlewediscussisaboutanewperspectiveonlearningandinnovation,apaper
ofCohen&Levinthal(1990).AsIsaidintheintroduction,Cohenisthefirstauthorwho
camewithabroaddefinitionofabsorptivecapacity.Theyusedabsorptivecapacityasatool
todetermineincentivesforresearchanddevelopmentinvestment.Theyconcludedthatfirms
musthavepriorknowledgetousenewinformation.

ThethirdarticleofLane&Lubatkin(1998)isaboutrelativeabsorptivecapacityand
interorganizationallearning.LaneandLubatkinfocusedinterorganizationallearning.Itis
aboutmultiplefirmlearning,firmsthatcometogetherwiththeirresourcesandwiththeir
skillstomaximizetheircapabilities.LaneandLubatkinalsointroducestheideaofgaining
knowledgebygettingnewpeoplefromothercompanies.

ThefourtharticleofZahra&George(2002)inthispapertheyreviewtheliteratureof
absorptivecapacityandshowthedistinctionbetweenafirmspotentialcapacity(PACAP)
andrealizedcapacity(RAPAC).Therearefourcapabilitiesofwhichabsorptivecapacity
consists:acquisition,assimilation,transformationandexploitation.ThePACAP(acquisition
andassimilation)makeafirmmorereceptivetoexternalknowledgeandledtomore
flexibility.TheRAPAC(transformationandexploitation)directlypromoteinnovation
processesthroughtheexploitationofacquiredandassimilatedknowledge.Inconclusion,
priorknowledgeisimportantfordevelopingabsorptivecapacity,butyoudonothaveto
forgetexternalknowledgeisalsoveryimportant.

ThefiftharticleofJansen&vandenBoschetal.(2005)isaboutmanagingpotentialand
realizedabsorptivecapacity.Whattheysuggestisthefirmsknowledgeenvironmentcould
influencethedevelopmentofitsabsorptivecapacity.Theobjectiveofthestudywasto
explorethedifferenteffectsoforganizationalantecedentsonaunitspotentialandrealized
absorptivecapacity.Tostudypotentialandrealizedabsorptivecapacityyouneedintriguing
insights,thebestwaytomanageisthroughfirmunderstanding.Thatiswhyyouneedtokeep
everyoneinvolvedinthedecisionmakingsoeveryoneknowswhatishappeninginthe
organization.
ThelastarticleofSchleimer&Pedersen(2013)isaboutthedrivingforcesofsubsidiary
absorptivecapacity.InthispaperSchleimer&Pedersenlookedattheknowledgesharingof
multinationalcompanieswithsubsidiariesaroundtheworld.Theymanagetheabsorptive
capacityusingdecentralizationandnormativeintegration.

2.PresentthelogicinCohen,W.M.&Levinthal,D.A(1990):AbsorptiveCapacity:ANew
PerspectiveonLearningandInnovation,AdministrativeScienceQuarterly,35(1):128152
andapplythecriteriapresentedbyWhetten(1989)toassessthetheory

Thispaperintroducestheconceptofabsorptivecapacity,aswealreadymentionedCohen&
Levinthaldefineabsorptivecapacityasafirmsgeneralabilitytovalue,assimilateand
commercializenew,externalknowledge.Theysuggestthatthisisafunctionofthe
organizationspriorknowledgeandexperiencetobeinnovative.Investmentinresearchand
developmentcanleadtoincreasedabsorptivecapacityandtoahigherperformanceofthe
company.Theirmodelconsistsoftechnicalopportunity,appropriabilityandresearchand
developmentspending,withabsorptivecapacityinthemiddle,andthisleadstoR&D
spending.Sotheconclusionisabsorptivecapacityisthereasontospendinresearchand
developmentinsteadofbuyingpatents.

AccordingtoWhettenagoodtheoryconsistsoutofthefollowingconcepts:
What:Whichfactorslogicallyshouldbeconsideredasapartoftheexplanationofthesocial
orindividualphenomenaofinterest?
How:Howarethefactorsrelated?
Why:Whataretheunderlyingpsychological,economic,orsocialdynamicsthatjustifythe
slectionoffactorsandtheproposedcausalrelationships?
Itisimportantthetheorypapermeetsthisdemands.

Startingwithwhat,therearetworightfactorscomprehensivenessandparsimonywhich
shouldbefulfilled.WecanconfirmCohen&Levinthalincludedallrelevantfactors,maybe
theyfocusedtoomuchontheresearch&developmentspendingpartentoolittleonthe
knowledgemanagement.Alsotheparsimonyisgood,herearenofactorsthataddno,ortoo
littleadditionalvalue.Thecontentofthearticleiswrittenveryclear,andthereareno
difficulties.
Secondthehow,thisoneisaboutthecausality.Istherearelationshipbetweenthefactors?
AsIsaidbefore,Cohen&Levinthaldevelopedamodelwiththreefactors:Technical
opportunity,appropriabilityandR&Dspending.Inthismodelyoucanseetherelationship
betweenthefactors.AbsorptivecapacityandResearch&Develpomentarestrongly
connected.Thisisveryclearandwelldefined.
Thethirdoneisthewhy.Cohen&Levinthalarethefirstauthorswhowroteabout
absorptivecapacity.Theyarealsothefirstauthorswhodidresearchbetweentherelationship
ofabsorptivecapacityandtheuseandroleofResearch&Development.Thosefactorshave
notbeeninvestigatedbeforeCohen&Levinthal.ThetheoryofAbsorptiveCapacityandthe
resultsofthisarticleareusefulforlotsoforganizations,becauseitwillhelptheresearch
departmentswithrecommendationshowtospendonR&D,soitwillhelpthemtobe
innovativeasacompany.
3. Discuss critically the results of the analysis of the article of Cohen &
Levinthal (1990) refer to the Shapira (2011) article

The paper of Shapira consists of two thoughts. First, research formulation

can take on the forms of conceptual frameworks, models, and theories.
Second, there are different languages of research. By using the article of
Shapira (2011) we will discuss the results of the article of Cohen. The
article of Shapira consists of four criticism on a theory.
First, organization science as a field where knowledge is progressing in a
cumulative manner (Shapira 2011). This criticism isnt relevant for Cohen
& Levinthal, because they are the first authors of the concept of absorptive
capacity.
Second, scientific theories improve by being subjected to falsification and
disproof. (Shapira 2011) I think it is difficult to falsify the theory, because
absorptive capacity, you can interpret the theory in different ways. It is a
theory to which is added, but the theory can not be falsified.
Third, it is not possible to proof your theory with empirical findings. Cohen
& Levinthal did not do empirical research, they did some surveys and with
those results they developed a theory.
Finally, theory construction should not be confused with quantitative
method for data analysis (Shapira 2011). We can conclude this is not
happening in the article by cohen & Levinthal.

4. Conclusion

The first article about absorptive capacity, is the most important one.
Because of their first real definition of absorptive capacity they have been
cited by many people. Also their article is used by writing literature about
organizational learning, the use and role of research & development, and
technological innovation.
Organizations also benefit from this theory, because of the
recommendations to the R&D department of the organizations, they are
more aware of the importance of spending on research and development.
The only negative thing to say about the theory of Cohen is the theory can
not be falsified. Furthermore, it meets the criteria of Shapira. So we can
conclude according to Whetten (1989) and Shapira (2011) this is a well-
written scientific article.
References
Cohen, W. M. & Levinthal, D. A., (1990). Absorptive Capacity: A New
Perspective on Learning and Innovation. Administrative Science
Quarterly, 35(1), 128-152
Fiol, M. C. & Lyles, M. A. (1985). Organizational learning. Academy of
Management Review, 10(4), 803-813
Jansen, J. P., van den Bosch, F. & Volberda, H. W. (2005). Managing
Potential and Realized Absorptive Capacity: How do Organizational
Antecedents Matter? Academy of Management Journal, 48(6), 999-
1015
Lane, P. J. & Lubatkin, M. (1998). Relative Absorptive Capacity and
Interorganizational Learning. Strategic Management Journal, 19(5),
461-477
Schleimer, S. C. & Pedersen, T. (2013). The Driving Forces of Subsidiary
Absorptive Capacity. Journal of Management Studies, 50(4), 646-672
Shapira, Z. (2011). Ive Got a Theory Paper - Do You?: Conceptual,
Empirical, and Theoretical Contributions to Knowledge in the
Organizational Sciences. Organizational Science, 22(5), 1312-1321
Whetten, D. A. (1989). What Constitutes a Theoretical Contribution?
Academy of Management Review, 14(4), 490-495
Zahra, S. A. & George, G. (2002). Absorptive capacity: a review,
reconceptualization, and extension. Academy of Management Review,
27(2), 185-203