Absorptive Capacity

Stephanie Duchek*

Capturing Absorptive Capacity:

A Critical Review and Future Prospects**

A bstract
Absorptive capacity is defined as the ability of a firm to recognize the value of new
external information, assimilate it, and apply it to commercial ends. It is regarded as
an important factor in both corporate innovation and general competitive advantage.
My approach recognizes the practice-based character of absorptive capacity. I provide
a critical review of previous empirical treatments of the construct, note the need for
advancing the research in this area, and suggest a qualitative approach that focuses on
knowledge absorption practices. An empirical illustration shows how a practice-based
approach can provide new insights into absorptive capacity.

JEL Classification: M10, O31, O32.

Keywords: Absorptive Capacity; Capabilities; Practices; Qualitative Research; Routines.

1 I ntroduction

A long stream of research in the innovation literature supports the notion that highly inno-
vative firms perform better than less innovative ones (Dosi (1988); Wolfe (1994)). But
what are the success factors for high innovativeness? We know that an effective, creative
department of research and development (R&D) is necessary if a firm is to be innovative.
However, the firms innovation success also depends on the extent to which it can use
technological opportunities from outside for its own purposes (Cohen (1995); Cohen and
Levinthal (1989)). Particularly in times of competitive pressure firms are forced to open
their innovation process and use external knowledge sources to increase their innovative
potential. A key factor to enhancing the firms ability to benefit from externally acquired
knowledge is its absorptive capacity (Cohen and Levinthal (1990)). It is assumed to be a
set of organizational capabilities by which firms acquire, assimilate, transform, and exploit
outside knowledge to produce a dynamic capability (Zahra and George (2002)) that is

* Stephanie Duchek, Research Assistant at the Management Department, School of Business & Economics, Freie
Universitt Berlin, Garystrasse 21, 14195 Berlin, Germany. E-mail: s.duchek@fu-berlin.de.
** I would like to thank the editor and the anonymous reviewer for their helpful comments and suggestions.

312 sbr 65 July 2013 312-329
 Absorptive Capacity

directed toward facilitating organizational change (Zott (2003)). Therefore, absorptive

capacity enables the firm to reconfigure its resource base and adapt to changing market
conditions to achieve a competitive advantage (Barney (1991)).

It is no surprise that, since its introduction in 1989, the concept has been enhanced
through reconceptualizations and extended by various empirical studies. But despite the
growing interest in absorptive capacity, it remains unclear what these papers have collec-
tively accomplished (Lane, Koka, and Pathak (2006)). The definitions that are used, and
the components, antecedents, and outcomes of the construct, are extremely heterogeneous.
Furthermore, many researchers treat the specific routines that constitute a firms absorp-
tive capacity as a black box. This treatment becomes particularly obvious in empirical
research, which is dominated by quantitative studies. Following the traditional assumption
that higher levels of R&D investments directly improve a firms ability to exploit external
knowledge, most studies have used R&D intensity as a substitute indicator for absorptive
capacity. Consequently, previous research paid scant attention to the constituent elements
underlying absorptive capacity and provided little information on how to improve know
ledge absorption. This points out the necessity of advancing research in this area. In line
with a few qualitative studies, my aim in this paper is to direct researchers attention to
specific routines of knowledge absorption that will generate a better understanding of
absorptive capacity.

The paper is organized as follows. Section 2 summarizes the most prominent conceptu-
alizations of absorptive capacity. In Section 3 I discuss previous empirical treatments of
absorptive capacity and the appropriateness of different quantitative methods of meas-
urement. I also provide an overview of the qualitative studies that investigate absorptive
capacity. In Section 4 I present a qualitative approach that focuses on knowledge absorp-
tion practices. Section 5 provides an empirical illustration that shows how this approach
might generate a better understanding of absorptive capacity. Section 6 concludes.

2 The C oncept of A bsorptive C apacity

Theoretically, the concept of absorptive capacity is located between the fields of organiza-
tional learning (Huber (1991); Kim (1998)), knowledge management (Chiva and Alegre
(2005); Oshri, Pan, and Newell (2006)), and dynamic capabilities (Mowery, Oxley, and
Silverman (1996)). Even though there are studies that think of absorptive capacity as
the ability of individuals (e.g., Cohen and Levinthal (1990); Minbaeva et al. (2003)) or
countries (e.g., Mowery and Oxley (1995)), past research indicates that there is a wide
consensus of opinion that sees absorptive capacity as an organizational construct.

Cohen and Levinthal (1989, 1990) introduced the concept to label a firms capabilities to
innovate, and thus to be dynamic. They assumed three components of absorptive capacity
and defined it as the ability to recognize the value of new knowledge, to assimilate
it, and to apply it to commercial ends (Cohen and Levinthal (1990)). Following the
traditional conceptualization, the ability to recognize new external knowledge depends
on a firms prior knowledge base, which equally enables and hinders knowledge absorp-

sbr 65 July 2013 312-329 313

 S. Duchek

tion. On the one hand, prior experiences facilitate knowledge absorption by defining the
locus of knowledge search (Rosenkopf and Nerkar (2001)). On the other hand, earlier
events restrict a firms search activities to familiar and proximate areas (Cyert and March
(1963); Helfat (1994); Stuart and Podolny (1996)). Firms might then recognize only
external knowledge that is close to their existing knowledge base and ignore other know
ledge sources (Cohen and Levinthal (1990)). Despite its great importance, the ability
to recognize the value of new knowledge is not sufficient to enhance a firms innovative
potential (Pennings and Harianto (1992)). Cohen and Levinthal (1990) stressed that firms
must also develop organizational capabilities for integration and utilization of the newly
acquired knowledge (see, e.g., Eisenhardt and Martin (2000); Grant (1996); Henderson
and Cockburn (1994); Kogut and Zander (1992)).

Since its introduction, the concept of absorptive capacity has been used and enhanced
by various studies. Zahra and George (2002) have reconceptualized absorptive capacity
as a set of organizational routines and processes by which firms acquire, assimilate,
transform, and exploit knowledge to produce a dynamic organizational capability. The
authors argue that firms can acquire and assimilate knowledge but might not have
the capability to transform and exploit the knowledge for profit generation and label the
first two dimensions the potential absorptive capacity and the latter two dimensions the
realized absorptive capacity. Todorova and Durisin (2007) demand a return to the tradi-
tional conceptualization of Cohen and Levinthal (1990). They reintroduce recognizing
the value, redefine transformation, and elaborate on the concepts of potential and realized
absorptive capacity. Despite their differences, all conceptualizations understand absorptive
capacity as a capability to address rapidly changing environments. It is assumed to be a
higher-order competence that consists of different individual capabilities building on each
other to yield absorptive capacity and gives the firm a foundation on which to achieve a
competitive advantage (Barney (1991)).

In contrast to resources that can be understood as nonspecific input units, capabilities

represent productive and explicitly firm-specific skills to use resources (Grant (1991)).
Amit and Schoemaker (1993) state that capabilities refer to a firms capacity to deploy
resources, usually in combination, using organizational processes, to effect a desired
end. Some authors refer to the concept of routines as building blocks of these organiza-
tional capabilities (Dosi, Nelson, and Winter (2000); Nelson and Winter (1982); Winter
(2000)). Grant (1991) argues: A capability is, in essence, a routine, or a number of inter-
acting routines. Traditionally, these routines are seen as the outcome of intentional design.
March and Simon (1958) refer to performance programs, and Cyert and March (1963)
to standard operating procedures as an automatic response to a triggering event. As an
alternative to this traditional view, other researchers such as Nelson and Winter (1982)
see routines as socially constructed and collective recurrent programs of action that are
the outcome of complex evolutionary processes. Accordingly, they are viewed as distinct
behavioral patterns, which are complex in nature and involve both formal and informal
processes (Dosi, Nelson, and Winter (2000)). This perspective has been modified by recent
developments in which researchers no longer understand routines as distinct patterns of
action, but instead in the sense of complex social practices (Nicolini, Gherardi, and Yanow
(2003); Schultze and Orlikowski (2004); Gherardi (2006)). The implied paradigm shift,

314 sbr 65 July 2013 312-329
 Absorptive Capacity

also called practice-turn (Bourdieu (1990); Schatzki, Knorr-Cetina, and Savigny (2001);
Whittington (2006)), provides interesting insights into the concept of absorptive capacity
and especially into the understanding of absorption practices in organizations. Following
this perspective, firms can be seen as entities that possess heterogeneous absorptive capa-
bilities as a function of their absorption practices.

3 P revious E mpirical R esearch

Using the concept of absorptive capacity in empirical research has turned out to be
somewhat difficult. The available methods are diverse and ambiguous. There is no stan-
dard measure, especially since different definitions have often led to different operationa
lizations. Hence, I review how the construct of absorptive capacity has been measured
in previous empirical research and classify these measures in table 1 (p. 316). Within
quantitative measures indicators and perceptive instruments are distinguished. While
the first use single firm-level data for measuring absorptive capacity, the second develop
questions representing absorptive capacity or parts of it at the operational level. A
second part concentrates on the most important qualitative studies capturing absorptive
capacity.

3.1 Q uantitative M easures

Various studies use indicators as proxies for measuring absorptive capacity. These indica-
tors are either input- or output-oriented.

3.1.1 I nput-O riented I ndicators

R&D efforts: Cohen and Levinthal (1990) were the first to measure absorptive capacity.
They asserted that while R&D obviously generates innovations, it also develops the firms
ability to identify, assimilate, and exploit knowledge from the environment. Thus, they
used R&D intensity as a proxy for absorptive capacity. Using R&D expenditures (Rocha
(1999)) or R&D intensity (Stock, Greis, and Fischer (2001); Rocha (1999); Tsai (2001))
are still the most popular ways to measure absorptive capacity. Kim (1997) and Kodama
(1995) note the crucial importance of a firms internal R&D in determining its ability to
import, comprehend, and assimilate external knowledge. They argue that investments in
R&D are crucial to supporting different research projects, a process that enhances learning
by doing. This learning enables the firm to import and use externally created knowledge.
Kim (1997) explains that R&D funds enable the firm to employ outside experts who are
knowledgeable in emerging fields, which can compress the absorption cycle of externally
acquired information. Investments in maintaining a strong R&D program also allow firms
to attract and keep talented scientists who follow scholarly developments in the field (Kim
(1997); Zahra (1996)). There are even empirical tests that confirm and support these argu-
ments (Gambardella (1992); Mowery, Oxley, and Silverman (1996)).

sbr 65 July 2013 312-329 315

316
Classification What is measured? Examples

R&D expenditure (Rocha (1999)),

S. Duchek

R&D intensity (Stock et al. (2001)),

R&D efforts
Existence of a formalized R&D department (Becker and Peters
Input-oriented (2000)).

Indicators Percentage of R&D personnel with a doctorate degree (Veugelers

R&D human capital
(1997)), R&D employees divided by total employees (Gao et al. (2008)).

Number of publications (Cockburn and Henderson (1998)),

R&D patents and
Output-oriented Number of patents (George et al. (2001)),
publications
Cross-citation rate (Mowery et al. (1996)).

AC at the Szulanski (1996) designed questions to capture the ability to value,
One-dimensional
operational level assimilate, and apply new technology.

Quantitative methods
Perceptive
Multiple Jansen et al. (2005) developed multiple items for every component
instruments Multidimensional
components of AC of AC as defined by Zahra and George (2002).
(questionnaires)
Single Nieto and Quevedo (2005) designed questions that refer to the links
Single components
components of AC between the firm and the surrounding environment.
Table 1: Methods of Measuring Absorptive Capacity

Kim (1998) studied the influence of proactively constructed crises

on AC.
AC, influencing
Single cases factors and Jones and Craven (2001) studied the influence of coordination
outcomes capabilities on AC.
Case studies
(interviews, obser- Jones (2006) studied the influence of individual agency on AC.
vations, archival
data) Van den Bosch et al. (1999) studied the influence of organizational
AC, influencing forms and combinative capabilities on AC.

Qualitative methods
Multiple cases factors and
outcomes Easterby-Smith et al. (2008) observed specific stories and events to
illustrate the processes within and different features of AC.

sbr 65 July 2013 312-329

 Absorptive Capacity

Professionalism of R&D: Other studies go beyond the financial view of R&D and use indi-
cators such as the existence of a formalized R&D department (Becker and Peters (2000);
Veugelers (1997)), a fully staffed R&D department, or the number of R&D departments
engaged in fundamental research (Veugelers (1997)) as proxies for absorptive capacity.
These authors note that the existence of R&D departments indicates that the firm has a
higher knowledge base. Since the absorptive capacity relies on the knowledge base (Cohen
and Levinthal (1990)), the firms expertise for in-house development has a considerable
positive effect on its capability to convert external knowledge into new products, processes,
or services. Research also shows that firms that conduct their own R&D are better able to
use externally available information (e.g., Allen (1977)). Arora and Gambardella (1990)
find evidence that large firms with greater internal knowledge are more actively involved
in pursuing strategies of external linkages. Freeman (1991) cites empirical evidence that
research associations, as well as licensing transactions, are used intensively by firms that
have their own R&D. A similar indicator includes not only the existence of R&D, but
also a systematic R&D that reflects the regularity of a firms internal R&D activities (Oltra
and Flor (2003)). The assumption is that firms that are continuously engaged in R&D
efficiently establish internal capabilities for the adaptation of external knowledge (Becker
and Peters (2000)). Malerba and Torrisi (1992) show that firms that do not permanently
invest in R&D have far less access to the technological opportunities that stem from
scientific research.

R&D human capital: Since the measures explained above do not include information
about the quality of R&D work, some authors use R&D human capital as a proxy
for absorptive capacity. R&D human capital is defined as R&D employees divided by
total employees (Gao, Xu, and Yang (2008)), percentage of higher-educated workforce
(Kleinknecht and Reijnen (1992)), technology staff divided by total staff (Luo (1997)),
number of doctorates in the R&D department (Veugelers (1997)), percentage of R&D
personnel with a doctorate degree (Veugelers (1997)), investment in R&D personnel (Liu
and White (1997)), or percentage of total sales devoted to personnel training (Becker and
Peters (2000)). The assumption that the human capital of a firm reflects its absorptive
capacity is justified, since Cohen and Levinthal (1990) suggest that a firms absorptive
capacity depends on the individual absorptive capacity of its employees. Hence, having a
more highly educated workforce implies greater levels of absorptive capacity. We can also
assume that internal training increases absorptive capacity, since it intensifies interaction
among individuals or groups, amplifies existing knowledge, and may convert it into new
types of knowledge. Rothwell and Dodgson (1991) show that the level of qualification is
strongly connected with the ability to establish external linkages to other organizations.
Particularly in the case of utilizing scientific knowledge, a high level of qualification seems
to be necessary.

The indicators described above provide some information about the existence of organi-
zational absorptive capacity. However, we cannot assume that these indicators reflect the
knowledge absorption process of a firm. There is very little empirical evidence and few
objective findings, especially for R&D intensity. Kleinknecht and Reijnen (1992) verify
that neither a firms R&D intensity nor a high rate of product R&D influences the extent
to which a firm cooperates. Nor could Rocha (1999) confirm the hypothesis that a higher

sbr 65 July 2013 312-329 317

 S. Duchek

intensity in R&D is necessary when firms are willing to absorb external knowledge from
alliances. Having a strong knowledge base that includes R&D capacity and a well-trained
labor force is key to successful innovation (Lundvall and Nielsen (1999)). However, for
several reasons these indicators are not applicable to measuring absorptive capacity. First,
because definitions of the concept stress that absorptive capacity consists of complex and
embedded single capabilities that build on one another to yield absorptive capacity. Thus,
the one-dimensional and quantitative R&D measures cannot meet the complexity and
emergence of the construct. Second, because the measures are confined to R&D, but the
traditional concept of absorptive capacity refers to the whole firm. The third and probably
most important reason is the input orientation of the indicators. A firm cannot be sure
that high investments and training lead to higher output, since the transformation from
input to output depends on many variables. R&D efforts constitute a necessary, although
not sufficient, condition for a firms absorptive capacity. Therefore, more comprehensive
methods of measurement are needed.

3.1.2 O utput-O riented I ndicators

Publications: Another way of measuring absorptive capacity is to use publications as output

variables. Following Cockburn and Henderson (1998), scientific publication counts are
an important indicator of research activity. This is particularly true of the investments
in doing basic science, which are often interpreted as building absorptive capacity
(Gambardella (1992)). Since publications are relatively uninformative about interaction
between researchers at different institutions, Cockburn and Henderson (1998) also look
for co-authorship of papers by researchers working in different organizations.

Patents: Using patents (e.g., George et al. (2001)) as a measure of the firms ability to
apply or exploit knowledge is a second method of measuring absorptive capacity. Some
researchers argue that for the firm to gain a patent, it must demonstrate some degree of
newness that reflects a change in its own knowledge base. Patents also record the firms
evolving or emerging knowledge and therefore represent a milestone in its progress in
discovery and innovation. Therefore, patents codify some of the learning that has occurred
in the firm, revealing its ability to understand, assimilate, and use external knowledge.

An enhancement of these output-oriented proxies is the use of co-citation analyses of a

firms scientific publications (Deeds (2001)) or the use of cross-citation rates, which refer
to patents of one firm cited in patents of another divided by total citations (Mowery,
Oxley, and Silverman (1996)). Citation patterns have generally been used very successfully
to trace interaction between researchers and across organizational boundaries.

Although output-oriented indicators provide useful insights into the outcomes of absorp-
tive capacity, they also suffer from limitations. A weakness of the studies that use scientific
publications as a proxy for absorptive capacity is that they concentrate on industries in
which publications are regular business. For example, Cockburn and Henderson (1998)
study pharmaceutical firms, which publish heavily. In pharma, the annual counts of
papers are comparable to the output of similarly sized universities and research institutes.

318 sbr 65 July 2013 312-329
 Absorptive Capacity

However, other industries publish either rarely or never. Similarly, using patents restricts
their application to contexts in which patents are significant and overlooks those industries
where they are not. Furthermore, the validity of patent statistics has been questioned,
because patents vary in their utility for organizations. The analysis of citations also presents
a number of difficulties. Citation is often highly ritualized, occurs with variable and often
very long lags, and may represent an acknowledgement of previous research. Additionally,
citation in the age of computers is extremely cheap and easy. Moreover, these measures
can only be used when the researcher is studying a dyadic relationship between two firms,
i.e., when researchers focus on the relative absorptive capacity introduced by Lane and
Lubatkin (1998). I conclude that output-oriented proxies cannot capture the knowledge
absorption process. They concentrate only on absorption outputs. It is unclear how these
outputs have arisen.

The discussion of both input- and output-oriented indicators used as proxies to measure
absorptive capacity shows the weaknesses of this approach. The major shortcoming I find
in previous research is the sparse attention paid to the constituent elements of absorptive
capacity and the few attempts to measure it outside of the R&D context. The simple proxy
measures fail to capture the rich, multidimensional, structural nature of absorptive capacity
as conceptualized above. Since absorptive capabilities reside at the operational level within
firms, aggregate firm-level measures may tend to mask much of the variance within those
firms. Because of this insight, perceptive instruments have recently attracted attention.

3.1.3 P erceptive I nstruments

Some studies measure absorptive capacity through perceptive instruments (e.g., Jansen,
Van den Bosch, and Volberda (2005); Lane and Lubatkin (1998); Szulanski (1996);
Wong, Shaw, and Sher (1999)). Researchers have developed single questions or a set
of questions that reflect absorptive capacity or parts of it at the operational level. This
research stream includes large-sample empirical work, which estimates the significance
and value of absorptive capacity. Quantitative analysis rests on a statistical evaluation.
The problem with these analyses is the diversity of the studies. These studies are based on
different theoretical backgrounds. They might use absorptive capacity as independent or
dependent variable, measure the construct as a whole or in parts, and use one- or multidi-
mensional measures. Consequently, comparing or categorizing these studies is difficult.

One-dimensional measures: One group of the studies that use one-dimensional measures
is restricted to one component of absorptive capacity. For instance, some studies concen-
trate on the analysis of the existence and importance of contacts between the firm and
its environment. Therefore, these studies measure only the first component of absorptive
capacity as independent variable. For example, Fosfuri and Trib (2008) let firms rate
the importance of seven external knowledge sources for innovation on a four-point scale
during the period 19982000. Nieto and Quevedo (2005) use eight questions that refer
to the links between the firm and its environment in greater detail. In both studies the
authors assume that more and deeper external contacts inevitably lead to higher levels of
absorptive capacity.

sbr 65 July 2013 312-329 319

 S. Duchek

Another category of one-dimensional measures tries to capture absorptive capacity as a

whole. One example is Szulanskis (1996) study of impediments to knowledge transfer
within organizations for which he hypothesizes that the lack of absorptive capacity is a
source of internal stickiness. Szulanski assumes that a lack of absorptive capacity exists in
cases in which recipients are unable to exploit outside sources of knowledge. Szulanski
measures the lack by using nine questions designed to capture the firms ability to value,
assimilate, and apply new technology.

Multidimensional measures: Some authors assume more than one dimension of absorptive
capacity. Hence, they develop a multidimensional measure of the construct. Liao, Welsch,
and Stoica (2003) conceptualize two dimensions of absorptive capacity, external knowl-
edge acquisition and intra-firm knowledge dissemination, that are close to the potential
and realized absorptive capacity introduced by Zahra and George (2002). They developed
a multi-item measure for every component, including items dealing with how often the
responsible entities in the business unit meet with clients, competitors, or others, and
statements, such as data on customer satisfaction are disseminated at all levels in the
organization.

Matusik and Heeley (2005) analyze absorptive capacity as a predictor of knowledge

outcome in the software industry and assert that absorptive capacity comprises both collec-
tive and individual dimensions. Therefore, they analyze multiple dimensions of absorp-
tive capacity: the firms relation to its external environment; the structure, routines, and
knowledge base of the main value creation group(s); and individuals absorptive abilities.
Minbaeva et al. (2003) study the relation between MNC subsidiary human resource
management practices, absorptive capacity, and knowledge transfer. They conceptualize
absorptive capacity as comprising both employees ability and motivation, and develop
three items to reflect ability and five items to reflect motivation.

In contrast to the studies described above, Jansen, Van den Bosch, and Volberda (2005)
use absorptive capacity as the dependent variable and investigate the influence of various
organizational mechanisms (coordination capabilities, system capabilities, and socializa-
tion capabilities) on the single dimensions of the construct. They refer to the definition of
Zahra and George (2002) and develop multiple items for every component of absorptive
capacity. Within potential absorptive capacity they apply six items for acquisition and
three items for assimilation. To measure realized absorptive capacity they use six items for
transformation and six items for exploitation.

Although the use of perceptive instruments overcomes some of the weaknesses of the indi-
cators used as proxies, the measures also have some limitations. Studies using one-dimen-
sional measures that focus on the acquisition component of absorptive capacity assume
that the existence and use of a great number of external knowledge sources automatically
leads to higher levels of absorptive capacity. However, these studies ignore the dynamic
interaction of decreasing absorptive capacity already discussed by Levinthal and March
(1993) as learning myopia, and by Christensen (1997) as the innovators dilemma, which
is often a result of firms listening to their customers and investing aggressively in these
relationships. Furthermore, we cannot infer that external information can be transformed

320 sbr 65 July 2013 312-329
 Absorptive Capacity

and exploited within the organization. Therefore, the existence of external contacts cannot
be an appropriate measure of absorptive capacity.

I argue that multidimensional measures and the one-dimensional measures that capture
absorptive capacity as a whole are better suited to capturing the complex construct. These
measures are aimed at identifying the process of knowledge absorption (throughput) and
thus are not limited to input or output variables. Consequently, they provide useful infor-
mation about the degree of absorptive capacity. Multidimensional measures can even
provide information on the degree of single capabilities of the construct.

Despite the advantages of quantitative surveys in comparison to the use of indicators as

proxies, the method is only conditionally applicable for representing practices of know
ledge absorption. Surveys can point out the degree of absorptive capacity or its single
capabilities and illustrate abstract processes or routines of knowledge absorption. However,
they cannot represent the absorption practices that are performed in a specific organiza-
tional context. To ensure high levels of comparability, the methods are usually fully stan-
dardized and structured; researchers only measure what has been previously defined by
items. Thus, no flexibility remains during the data collection process. Hence, few authors
prefer to use qualitative methods for capturing absorptive capacity.

3.2 Q ualitative Studies and Their M ethods

Previously, only a few qualitative studies have analyzed absorptive capacity. These studies
provide insights into the historical development and changes of absorptive capacity in
organizations. However, these studies are based on different theoretical models of absorp-
tive capacity.

For example, Kim (1998) assumes prior knowledge and learning efforts as being the
two major elements of absorptive capacity, and uses the example of the Hyundai Motor
Company to illustrate these elements. Kim pictures the process of advancing absorptive
capacity and shows that Hyundai acquired external knowledge to expand its prior knowl-
edge base and proactively constructed crises to increase the intensity of effort in orga-
nizational learning. The example shows how the firm became one of the most dynamic
automobile producers in developing countries. To capture the prior knowledge base and
learning efforts, Kim (1998) makes particular use of interviews with executives in manu-
facturing and R&D, which he supplements with firm records and plant tours. Van den
Bosch, Volberda, and De Boer (1999) and Davids and Verbong (2007) also illustrate the
role of absorptive capacity in organizational change processes.

In their longitudinal study, Jones and Craven (2001) investigate the process by which
participation in a teaching company scheme (TCS) helps to develop managerial capa-
bilities in a small family-owned manufacturing firm. They illustrate the development of
absorptive capacity by analyzing the firms activities over a two-year period by partici-
pating in the TCS program and acting as participating observers. Thus, they conclude that
improving absorptive capacity requires the development of new coordination capabilities

sbr 65 July 2013 312-329 321

 S. Duchek

that help codify tacit knowledge. Jones (2006) also investigates the influence of individual
agency on absorptive capacity by conducting interviews with all senior managers and
departmental managers directly involved in the change.

In contrast, Easterby-Smith et al. (2008) go one step further, analyzing three cases, each in a
different industry. Their data sources center especially on interviews, documents, and obser-
vations of formal and informal meetings. The authors gather data by tracking the evolution
of major changes and innovations between 2003 and 2005 and focus on processes leading
to the adoption and implementation of particular ideas. Within each organization, they
follow specific stories and events to illustrate the internal absorption processes and identify
different features of absorptive capacity. They argue that a process perspective on absorptive
capacity should particularly include the role of power in the way knowledge is absorbed by
organizations and provide a better understanding of the nature of boundaries within and
around organizations. Furthermore, they clarify the role of activation triggers and social
integration mechanisms. The authors provide some practical illustrations of how firms deal
with external knowledge. Unfortunately, they present only one story per organization.

Qualitative studies have started to adopt new perspectives on absorptive capacity. Kim
(1998), Van den Bosch, Volberda, and De Boer (1999), and David and Verbong (2007)
focus particularly on the role of absorptive capacity in the historical development of firms,
changes of absorptive capacity over time as well as causes and consequences of these
changes. However, these studies do not concentrate on the constituent elements of absorp-
tive capacity. Jones and Craven (2001), Jones (2006), and Easterby-Smith et al. (2008)
adopt a routine-based perspective on absorptive capacity. Using interviews and participant
observation, they focus on specific absorption processes or explicitly refer to (more or less
successful) routines of absorptive capacity. Hence, they illustrate knowledge absorption
practices in specific organizational contexts. Nonetheless, they do not provide any infor-
mation about the concrete practices that underlie individual components or capabilities
of absorptive capacity, and they do not explain what contribution these practices make to
successful knowledge absorption. This research gap can be filled by applying a practice-
based approach.

4 A P ractice -B ased A pproach

As explained above, absorptive capacity is considered an organizational capability that

consists of a set of organizational routines. These routines are so close to action that they
cannot be separated from acting or practicing. Thus, as Regnr (2008) notes, researchers
need to link absorptive capabilities to individual-level and group-level activities and
interaction if we are to understand their origins, the way they change over time, and the
underlying social (and possibly causal) processes and mechanisms. Against this back-
ground, a practice-based approach seems to be useful to capture absorptive capacity
empirically.

A practice-based perspective is not new in empirical research. Cook and Brown (1999)
point out that the epistemology of practice is able to show the co-ordinated activities

322 sbr 65 July 2013 312-329
 Absorptive Capacity

of individuals and groups in doing their real work as it is informed by a particular organi-
zational or group context. Therefore, a practice-based perspective provides an alternative
approach for the analysis of absorption routines, one that provides the researcher with
a comprehensive picture of what the members of an organization actually do and how
organizations work.

However, the empirical analysis of absorption practices poses a great challenge for
researchers, because it is an attempt to understand complex, embedded, and context-
dependent patterns of knowing and acting. Practices are usually distributed over time
and space (Pentland and Feldman (2008)). Different participants perform different parts
of a practice, for example, R&D, marketing, and production are involved in the product
development routine. Not least of all, practitioners have different opinions on how a
practice is, or should be, executed. Moreover, practices have no clear boundaries and
are intertwined with other, closely related practices. Although it is possible to observe
the firm-specific patterns of activity (performative aspects of a practice), the underlying
structures (ostensive aspects) are not directly observable, and may not even be understood
or articulated by the practitioners (for the distinction between performative and ostensive
aspects of routines see Feldman and Pentland (2003)). These structures are only indirectly
observable and can be understood as stories about the practice. However, these stories
must be neither coherent nor consistent. In most cases there is not only one ostensive
aspect of a practice. Instead, the practice will result from a collection of several overlapping
narratives (Pentland and Feldman (2008)). This poses challenges for researchers, because
they may have to reconstruct the practice of many different stories. In this context, Pent-
land and Feldman remark facetiously identifying a particular routine is a bit like trying
to isolate the Gulf Stream from the Atlantic Ocean.

To identify recurrent interaction patterns of absorptive capacity, researchers need appro-

priate research methods. Since the object of measurement is multifaceted and notoriously
difficult to capture, only complex qualitative methods come into question. Charreira-Petit
and Huault (2008) argue that when studying practices, researchers must participate in
organizational life and therefore must prefer to use methods such as ethnography, action
research, and storytelling. Especially ethnography can be seen as the key system with
which to observe social and embedded practices and to simultaneously participate in
them (Yanow (2006)). Ethnography makes it possible to study actual practices in real-
world situations, and enables a researcher to study organizations as the complex social,
cultural, and political systems that they are. As a consequence, ethnographical field studies
provide an opportunity to open the black box of organizational routines and look
inside to examine how this ubiquitous organizational phenomenon operates (Pentland
and Feldman (2008)). This method also enables researchers to study the development
and changes of practices, to investigate ostensive and performative aspects of practices
(Feldman and Pentland (2003)), and to distinguish between espoused and actual prac-
tices (Brown and Duguid (1991)). The following illustration shows how a practice-based
approach can provide additional insights in the concept of absorptive capacity.

sbr 65 July 2013 312-329 323

 S. Duchek

5 I llustration of the P ractice - based A pproach : The C ase of a G erman

H igh -Tech Firm

Following a practice-based approach I investigated the knowledge absorption practices of

a medium-sized, family-owned, and highly innovative firm in the German engineering
industry. The qualitative case study was part of a joint research project on innovation
processes in German high-tech firms and lasted from September 2007 until September
2009. Using a mixture of data collection methods (15 narrative interviews, participant
observation, and the analysis of archival data) the case study enabled me to get closer
to the dimensions of absorptive capacity, to identify complex and embedded practices
of knowledge absorption, and thus to contribute to opening the proverbial black box
between inputs and outcomes (Van de Ven (1993)). As a result I could identify specific
knowledge absorption practices for each component of absorptive capacity as defined by
Cohen and Levinthal (1990), and emphasize the contribution they make to successful
knowledge absorption. I give three examples below:

Technology scouting is an important practice of knowledge acquisition. It refers to a

structured observation and early recognition of opportunities, relevant changes, and tech-
nological developments, and includes several ancillary practices that particularly facilitate
the identification of new external knowledge and the transfer of that knowledge into the
organization. First, technology scouting includes an active search for external knowledge
using various sources of information, such as the internet, technical literature, or scientific
publications. These search activities are particularly helpful in identifying technological
knowledge that can be integrated into current or planned development projects. Second,
technology scouting comprises the participation in communication platforms, e.g., confer-
ences, congresses, forums, and training sessions that also facilitate the identification of new
knowledge. These platforms also enable the establishment and maintenance of personal
networks, which improve the future acquisition of external knowledge. Third, technology
scouting also signifies the transfer of identified knowledge into organizational units, which
is an important condition for the subsequent integration of knowledge into the firms
existing structures.

An important practice that is part of knowledge assimilation is the face-to-face communi-

cation that supports the knowledge sharing within the firm. Personal communication takes
place at different meetings, such as the firms regular R&D meetings, sales workshops, and
strategy meetings. These meetings induce an intensive knowledge sharing between indi-
viduals, departments, or business units, and provide an opportunity to discuss complex
product details and illustrate development problems. Face-to-face communication also
enables an ongoing feedback between partners, which creates a common understanding
of product and process developments and enhances the credibility of discussion partners.
Furthermore, such communication helps employees to become acquainted with other
organizational actors, and to establish dense social networks that facilitate (informal)
knowledge flows in and between different departments and business units of the firm
(see also Orlikowski (2000)). These networks provide an important foundation for future
interactions and joint problem solving.

324 sbr 65 July 2013 312-329
 Absorptive Capacity

The informal promotion of new ideas by key individuals of the firm is a main practice of
knowledge exploitation. These key individuals act as internal drivers who support a project
idea from inception to implementation. Particularly, these internal drivers introduce
new ideas, gather information, and obtain the necessary approvals. Further, they help to
convince internal and external stakeholders, such as sales departments or customers, of the
usefulness and potential benefits of newly developed products and processes. This confirms
Days (1994) findings that new development projects cannot be successful without an
internal driver who is committed to the project and who has the appropriate power to
lead it to success. It also underlines Jones (2006) statement that change agents play a
central role for the implementation of new knowledge.

6 C onclusion

The review of previous empirical treatments of absorptive capacity illustrates the necessity
of advancing research in this area. Previous methods of measurement do not address the
complexity of the construct and barely recognize its routine-based character. Therefore, I
suggest an alternative approach to capturing absorptive capacity, one that overcomes the
weaknesses in empirical research. I assume that a practice-based approach and the use
of qualitative methods, such as ethnographies and narratives, are the most appropriate
methods for identifying the routines or practices that build absorptive capacity. I use a
case study to illustrate how a practice-based approach can provide additional insight into
the concept of absorptive capacity. It helps to identify specific practices that underlie each
component of absorptive capacity and shows how they contribute to successful knowledge
absorption. Therefore, future analysis of knowledge absorption practices especially in
different firms and industries can make important contributions to opening the black
box of absorptive capacity and indicate how to capture the complex construct empiri-
cally. It can also offer valuable implications for practitioners, particularly with regard to
the implementation of innovative initiatives and the successful management of absorptive
capacity.

sbr 65 July 2013 312-329 325

 S. Duchek

R eferences

Allen, Thomas J. (1977), Managing the flow of technology, Cambridge: M.I.T. Press.
Amit, Raphael and Paul J. H. Schoemaker (1993), Strategic assets and organizational rent, Strategic Management
Journal 14, 3346.
Arora, Ashish and Alfonso Gambardella (1990), Complementarity and internal linkages: The strategies of the large
firms in biotechnology, Journal of industrial economics 4, 36179.
Barney, Jay B. (1991), Firm resources and sustained competitive advantage, Journal of Management 17, 99120.
Becker, Wolfgang and Jrgen Peters (2000), Technological opportunities, absorptive capacities, and innovation, Univer-
sitt Augsburg: Institute for Economics.
Bourdieu, Pierre (1990), The logic of practice, Stanford: Stanford University Press.
Brown, John Seely and Paul Duguid (1991), Organizational learning and communities-of-practice: Toward a unified
view of working, learning and innovation, Organization Science 2, 4057.
Charreira-Petit, Sandra and Isabelle Huault (2008), From practice-based knowledge to the practice of research:
Revisiting constructivist research works on knowledge, Management Learning 39, 7391.
Chiva, Ricardo and Joaqun Alegre (2005), Organizational learning and organizational knowledge, Management
Learning 36, 4968.
Christensen, Clayton M. (1997), The innovators dilemma: When technologies cause great firm to fail, Boston: Harvard
Business School Press.
Cockburn, Iain M. and Rebecca M. Henderson (1998), Absorptive capacity, coauthoring behavior, and the organiza-
tion of research in drug discovery, Journal of Industrial Economics 46, 15782.
Cohen, Wesley M. (1995), Empirical studies of innovative activity. In Paul Stoneman (ed.), Handbook of the economics
of innovation and technical change, Oxford: Blackwell.
Cohen, Wesley M. and Daniel A. Levinthal (1989), Innovation and learning: The two faces of R&D, Economic
Journal 99, 56996.
Cohen, Wesley M. and Daniel A. Levinthal (1990), Absorptive capacity: A new perspective on learning and innova-
tion, Administrative Science Quarterly 35, 12852.
Cook, Scott D. N. and John Seely Brown (1999), Bridging epistemologies: The generative dance between organiza-
tional knowledge and organizational knowing, Organization Science 10, 381400.
Cyert, Richard M. and James G. March (1963), A behavioral theory of the firm, Englewood Cliffs, NJ: Prentice-
Hall.
Davids, Mila and Geert Verbong (2007), Absorptive capacity in solid-state technology and international knowledge
transfer, Comparative Technology Transfer and Society 5, 131.
Day, Diana L. (1994), Raising radicals: Different processes for championing innovative corporate ventures, Organiza-
tion Science 5, 14872.
Deeds, David L. (2001), The role of R&D intensity, technical development and absorptive capacity in creating entre-
preneurial wealth in high technology start-ups, Journal of Engineering and Technology Management 18, 2947.
Dosi, Giovanni (1988), The nature of the innovative process. In Giovanni Dosi, Christopher Freeman, Richard R.
Nelson, Gerald Silverberg, and Luc L. Soete (eds.), Technical change and economic theory, London: Printer Pub-
lishers, 22138.
Dosi, Giovanni, Richard R. Nelson and Sidney G. Winter (2000), The nature and dynamics of organizational capabilities,
Oxford: Oxford University Press.
Easterby-Smith, Mark, Manuel Graca, Elena Antonacopoulou and Jason Ferdinand (2008), Absorptive capacity:
A process perspective, Management Learning 39, 483501.
Eisenhardt, Kathleen M. and Jeffrey A. Martin (2000), Dynamic Capabilities: What are they?, Strategic Management
Journal 21, 110521.

326 sbr 65 July 2013 312-329
 Absorptive Capacity

Feldman, Martha S. and Brian T. Pentland (2003), Reconceptualizing organizational routines as a source of flexibility
and change, Administrative Science Quarterly 48, 94118.
Fosfuri, Andrea and Josep A. Trib (2008), Exploring the antecedents of potential absorptive capacity and its impact
on innovation performance, Omega 36, 17387.
Freeman, Christopher (1991), Networks of innovators: A synthesis of research issues, Research Policy 20, 499514.
Gambardella, Alfonso (1992), Competitive advantages from in-house scientific research: The US pharmaceutical
industry in the 1980s, Research Policy 21, 391407.
Gao, Shanxing, Kai Xu, and Jianjun Yang (2008), Managerial ties, absorptive capacity, and innovation, Asia Pacific
Journal of Management 25, 395412.
George, Gerard, Shaker A. Zahra, Kathleen K. Wheatley, and Raihan Khan (2001), The effects of alliance portfolio
characteristics and absorptive capacity on performance: A study of biotechnology firms, Journal of High Technology
Management Research 12, 20526.
Gherardi, Silvia (2006), Organizational knowledge: The texture of workplace learning, Oxford: Blackwell Publishers.
Grant, Robert M. (1991), The resource-based theory of competitive advantage: Implications for strategy formulation,
California Management Review 33, 11435.
Grant, Robert M. (1996), Prospering in dynamically-competitive environments: Organizational capability as knowl-
edge integration, Organization Science 7, 37587.
Helfat, Constance E. (1994), Evolutionary trajectories in petroleum firm R&D, Management Science 40, 172047.
Henderson, Rebecca M. and Iain M. Cockburn (1994), Measuring competence? Exploring firm effects in pharma-
ceutical research, Strategic Management Journal 15, 6384.
Huber, George P. (1991), Organizational learning: The contributing processes and the literatures, Organization Studies 2,
88115.
Jansen, Justin J. P., Frans A. J. Van den Bosch, and Henk W. Volberda (2005), Managing potential and realized ab-
sorptive capacity: How do organizational antecedents matter?, Academy of Management Journal 48, 9991015.
Jones, Oswald (2006), Developing absorptive capacity in mature organizations, Management Learning 37, 35576.
Jones, Oswald and Martin Craven (2001), Expanding capabilities in a mature manufacturing firm: Absorptive capac-
ity and the TCS, International Small Business Journal 19, 3955.
Kim, Linsu (1997), Imitation to innovation: The dynamics of Koreas technological learning, Boston: Harvard Business
Press.
Kim, Linsu (1998), Crisis construction and organizational learning: Capability building in catching-up at Hyundai
Motor, Organization Science 9, 50621.
Kleinknecht, Alfred and Jeroen O. N. Reijnen (1992), Why do firms cooperate on R&D? An empirical study, Re-
search Policy 21, 34760.
Kodama, Fumio (1995), Emerging patterns of innovation: Sources of Japans technological edge, Boston: Harvard Busi-
ness School Press.
Kogut, Bruce and Udo Zander (1992), Knowledge of the firm, combinative capabilities and the replication of tech-
nology, Organization Science 3, 38397.
Lane, Peter J., Balaji R. Koka and S. Pathak (2006), The reification of absorptive capacity: A critical review and
rejuvenation of the construct, Academy of Management Review 31, 83363.
Lane, Peter J. and Michael Lubatkin (1998), Relative absorptive capacity and interorganizational learning, Strategic
Management Journal 19, 46177.
Levinthal, Daniel A. and James A. March (1993), The myopia of learning, Strategic Management Journal 14, 95112.
Liao, Jianwen, Harold Welsch and Michael Stoica (2003), Organizational absorptive capacity and responsiveness:
An empirical investigation of growth-oriented SMEs, Entrepreneurship Theory and Practice 23, 6386.
Liu, Xielin and Steven R. White (1997), The relative contributions of foreign technology and domestic inputs to
innovation in Chinese manufacturing industries, Technovation 17, 11925.

sbr 65 July 2013 312-329 327

 S. Duchek

Lundvall, Bengt-ke and Peter Nielsen (1999), Competition and transformation in the learning economy illustrated
by the Danish case, Revue dEconomie Industrielle 88, 6790.
Luo, Yadong (1997), Partner selection and venturing success: The case of joint ventures with firms in the peoples
republic of China, Organization Science 8, 64862.
Malerba, Franco and Salvatore Torrisi (1992), Internal capabilities and external networks in innovative activities.
Evidence from the software industry, Economies of innovation and new Technology 2, 4971.
March, James G. and Herbert A. Simon (1958), Organizations, New York: Wiley.
Matusik, Sharon F. and Michael B. Heeley (2005), Absorptive capacity in the software industry: Identifying dimen-
sions that affect knowledge and knowledge creation activities, Journal of Management 31, 54972.
Minbaeva, Dana, Torben Pedersen, Ingmar Bjrkman, Carl F. Fey and H. J. Park (2003), MNC Knowledge transfer,
subsidiary absorptive capacity and HRM, Journal of International Business Studies 34, 58699.
Mowery, David C. and Joanne E. Oxley (1995), Inward technology transfer and competitiveness. The role of national
innovation systems, Cambridge Journal of Economics 19, 6793.
Mowery, David C., Joanne E. Oxley and Brian S. Silverman (1996), Strategic alliances and interfirm knowledge
transfer, Strategic Management Journal 17, 7791.
Nelson, Richard R. and Sidney G. Winter (1982), An evolutionary theory of economic change, Cambridge: Harvard
University Press.
Nicolini, Davide, Silvia Gherardi, and Dvora Yanow (eds.) (2003), Knowing in organizations: a practice-based approach,
Armonk, NY: ME Sharpe.
Nieto, Mariano and Pilar Quevedo (2005), Absorptive capacity, technological opportunity, knowledge spillovers, and
innovative effort, Technovation 25, 114157.
Oltra, Mara J. and Marisa Flor (2003), The impact of technological opportunities and innovative capabilities on
firms output innovation, Creativity and Innovation Management 12, 13744.
Orlikowski, Wanda J. (2000), Using technology and constituting structures: A practice lens for studying technology
in organizations, Organization Science 11, 40428.
Oshri, Ilan, Shan L. Pan, and Sue Newell (2006), Managing trade-offs and tensions between knowledge management
initiatives and expertise development practices, Management Learning 37, 6382.
Pennings, Johannes M. and Farid Harianto (1992), Technological networking and innovation implementation, Or-
ganization Science 3, 35682.
Pentland, Brian T. and Martha S. Feldman (2008), Designing routines: On the folly of designing artifacts, while
hoping for patterns of action, Information and Organization 18, 23550.
Regnr, Patrick (2008), Strategy-as-practice and dynamic capabilities: Steps towards a dynamic view of strategy, Hu-
man Relations 61, 56588.
Rocha, Frederico (1999), Inter-firm technological cooperation: Effects of absorptive capacity, firm-size and specializa-
tion, Economies of Innovation and new Technology 8, 25371.
Rosenkopf, Lori and Atul Nerkar (2001), Beyond local search: Boundary-spanning, exploration, and impact in the
optical disk industry, Strategic Management Journal 22, 287306.
Rothwell, Roy and Mark Dodgson (1991), External linkages and innovation in small and medium-sized enterprises,
R&D Management 21, 12537.
Schatzki, Theodore R., Karin Knorr-Cetina and Eike von Savigny (2001), The practice turn in contemporary theory,
London: Routledge.
Schultze, Ulrike and Wanda J. Orlikowski (2004), A practice perspective on technology-mediated network relations:
The Use of Internet-based self-serve technologies, Information System Research 15, 87106.
Stock, Gregory N., Noel P. Greis, and William A. Fischer (2001), Absorptive capacity and new product development,
Journal of High Technology Management Research 12, 7791.

328 sbr 65 July 2013 312-329
 Absorptive Capacity

Stuart, Toby E. and Joel M. Podolny (1996), Local search and the evolution of technological capabilities, Strategic
Management Journal 17, 2138.
Szulanski, Gabriel (1996), Exploring internal stickiness: Impediments to the transfer of best practice within the firm,
Strategic Management Journal 17, 2743.
Todorova, Gergana and Boris Durisin (2007), Absorptive capacity: Valuing a reconceptualization, Academy of Man-
agement Review 32, 77496.
Tsai, Wenpin (2001), Knowledge transfer in intraorganizational networks: effects of network position and absorptive
capacity on business unit innovation and performance, Academy of Management Review 44, 9961004.
Van de Ven, Andrew H. (1993), An assessment of perspectives on strategic change. In Luca Zan, Stefano Zambon, and
Andrew M. Pettigrew (eds.), Perspectives on Strategic Change, London: Kluwer Academic Publishers, 31323.
Van den Bosch, Frans A. J., Henk W. Volberda and Michiel de Boer (1999), Coevolution of firm absorptive capac-
ity and knowledge environment: Organizational forms and combinative capabilities, Organization Science 10,
55168.
Veugelers, Reinhilde (1997), Internal R&D expenditures and external technology sourcing, Research Policy 26, 30315.
Whittington, Richard (2006), Completing the practice turn in strategy research, Organization Studies 27, 61334.
Winter, Sidney G. (2000), The satisficing principle in capability learning, Strategic Management Journal 21, 981
96.
Wolfe, Richard A. (1994), Organizational innovation: Review, critique and suggested research directions, Journal of
Management Studies 31, 40531.
Wong, Veronica, Vivienne Shaw and Peter J. Sher (1999), Intra-firm learning in technology transfer: A study of Tai-
wanese information technology firms, International Journal of Innovation Management 3, 42758.
Yanow, Dvora (2006), Talking about practices: On Julian Orrs talking about machines, Organization Studies 27,
174356.
Zahra, Shaker A. (1996), Technology strategy and performance: A study of corporate-sponsored and independent
Biotechnology ventures, Journal of Business Venturing 11, 289321.
Zahra, Shaker A. and Gerard George (2002), Absorptive capacity: A review, reconceptualization, and extension,
Academy of Management Review 27, 185203.
Zott, Christoph (2003), Dynamic capabilities and the emergence of intra-industry differential firm performance:
Insights from a simulation study, Strategic Management Journal 24, 97125.

sbr 65 July 2013 312-329 329