Progress, Problems, and Prospects
More than two decades after the publication of Cohen and Levinthal’s (1989, 1990) seminal studies, an astounding number of studies has appeared taking absorptive capacity as one of the building blocks. Because of conceptual and methodological problems and challenges, studies have also sought to refine, reconceptualize, reify, and even rejuvenate the construct (Lane et al., 2006; Todorova and Durisin, 2007; Volberda et al., 2010; Zahra and George, 2002). Our review illustrates that, even though our understanding of the role and value of absorptive capacity has progressed strongly, problems and prospects for future research remain and merit discussion. An overview of the progress, problems, and prospects along the aspects covered in the current review is provided in Table 13.5.
Table 13.5 Progress, problems, and future research
| Progress | Future research | |
| Definition | High | Creating uniformity |
| Definition should not broaden operationalizations | ||
| Dimensions | Medium | Consistency in dimensions |
| Measurement | Low | Consistency in operationalization |
| More focus on the nature and type of knowledge stocks and existing knowledge bases for operationalizing absorptive capacity | ||
| Less reliance on R&D-based and patent-based measures as measures of absorptive capacity | ||
| Operationalize different capabilities constituting absorptive capacity separately | ||
| Include measures that capture cumulativeness and learning dynamics of absorptive capacity | ||
| Levels of analysis | Low | More focus on individual level and individual absorptive capacity, how relationships between individuals create unit absorptive capacity, and subsequently how inter-unit relations create firm absorptive capacity |
| Differentiate effects of absolute and relative absorptive capacity | ||
| Outcomes | High | Study the nomological network of absorptive capacity and its outcomes |
| Study additional outcomes, such as transfer of different types of knowledge, exploitation vs. exploration, and ambidexterity. | ||
| Antecedents | Medium | Studying multiple antecedents to assess their strength |
| Linking antecedents at multiple levels of analysis | ||
| Moderators | Low | Study the moderating effect of absorptive capacity on relationships of knowledge transfer variables and innovation/performance |
| Introduce absorptive capacity as moderator in social network and capital studies |
The initial definition of absorptive capacity forwarded by Cohen and Levinthal (1990) has been refined multiple times and is reaching theoretical saturation. Our review of existing research shows that the distinction between potential and realized absorptive capacity has recently been most often applied as it is parsimonious and captures processes of external knowledge acquisition and the internal transformation of that knowledge to commercial ends, which underscores the importance of external and internal research and development (Bierly et al., 2009; Rothaermel and Alexandre, 2009; Zahra and George, 2002). Lane et al.’s (2006) definition revolving around exploratory, transformative, and exploitative learning processes has set the stage for enhancing our understanding of how absorptive capacity may lead to the acquisition and application of new and unrelated knowledge. However, it potentially harbors the predicament that absorptive capacity is equated with its outcomes of exploratory and exploitative innovations. March (1991: 85) stated that the ‘essence of exploration is experimentation with new alternatives,’ whereas the ‘essence of exploitation is the refinement and extension of existing competences.’ Firms may acquire external knowledge they did not previously possess, but such knowledge may also refine existing knowledge and be more exploitative in nature. If necessary at all, the exploratory learning process is limited to developing in-house expertise and problem solving that complements the activities of its partners prior to acquiring their knowledge (Mowery et al., 1996). Nevertheless, empirical studies have shown that the capabilities underlying absorptive capacity are distinct organizational processes and should be studied separately (e.g. Camisón and Forés, 2010; Jansen et al., 2005; Lichtenthaler, 2009). Hence, future studies would benefit from differentiating the distinct capabilities constituting absorptive capacity.
A side effect of the elusive nature of the construct is that it has not only hampered its conceptualization, but also obfuscated its measurement in that studies have adopted absorptive capacity as a building block without questioning its scope and its relationship to other constructs. Prior studies have pursued a wide variety of ways to measure absorptive capacity, but tend to use research and development-based measures. However, our review of the insights gained so far indicates that using research and development intensity as a gauge for absorptive capacity does not pay credit to the richness of the construct (Lane and Lubatkin, 1998; Lane et al., 2006; Mowery et al., 1996). As a remedy, studies have also relied on patent-based measures, experience-based measures, and scales. While these measures proxy a firm’s knowledge stock, they do not necessarily correlate with each other, with research and development-based measures and with their antecedents and outcomes. For example, if firm size is an antecedent of absorptive capacity and net earnings an outcome, the mediating effect of absorptive capacity will be substantially stronger if it is measured using research and development expenditures or patent stocks instead of using a measure assessing prior experience. There is no general agreement on how to measure absorptive capacity. More precise measures are hence needed which more accurately capture the type and nature of a firm’s knowledge stock, and appraise the different capabilities underlying absorptive capacity.
A crucial way to deal with the operationalization issue and to advance research in general is to study the microfoundations of absorptive capacity (Gavetti, 2005; Lewin et al., 2010). First, future research merits from including multiple levels of analysis in studying absorptive capacity. Because individuals and people play a principal role in adapting and absorbing knowledge (Argote and Ingram, 2000; Cohen and Levinthal, 1990; Lane et al., 2006), further studies on the role of individuals and their subnetworks and on the interplay of absorptive capacity at the individual, unit, firm, and network level are needed. Absorptive capacity of a unit is dependent on the knowledge stocks of individual members and on ties between them. In turn, firm absorptive capacity is dependent on unit knowledge stocks and on the links between units. Considering the nature and type of individual knowledge stocks as well as the tie and network correlates of individuals (cf. Cross and Cummings, 2004) would more precisely uncover how the absorptive capacity of units and firms is developed. Multilevel studies would also be able to uncover the antecedents and outcomes at various levels as well as interactions among them.
Second, future research would benefit from assessing the relative value of absolute and relative absorptive capacity, preferably in conjunction with analyses for actors at multiple levels of analysis. Absolute absorptive capacity centers on the presence of existing knowledge per se and explains the opportunity set of actors to acquire and assimilate knowledge. In contrast, relative absorptive capacity revolves around knowledge similarities and technological overlap between interacting actors and explains whether they are able to absorb knowledge in specific dyads and networks. However, in the context of alliances, Hoang and Rothaermel (2005) examined the effect of general and partner-specific alliance experience, and found that general experience is a stronger predictor of alliance success.
Third, the nomological network surrounding absorptive capacity should be further disentangled. In addition to being a function of prior knowledge, absorptive capacity is dependent on organizational characteristics and cannot be detached from organizational structure (Cohen and Levinthal, 1990). However, if a firm’s structure is part of its absorptive capacity, then, for example, so are the social networks creating that structure and it becomes inherently difficult to differentiate organization from absorptive capacity. It underscores the importance of considering absorptive capacity at multiple levels of analysis, as organizational structure does influence individual and unit knowledge stocks. Similarly, studies have assessed how combinative capabilities contribute to a firm’s absorptive capacity (e.g. Jansen et al., 2005; Van den Bosch et al., 1999). However, as both emphasize firm’s ability to synthesize and apply knowledge, both are dependent on internal and external interfaces, and both ultimately lead to new and refined capabilities, one may be equal, form a subset, or be antecedent to another. Uncovering the nomological network of absorptive capacity would also aid studies examining whether firms can acquire absorptive capacity through acquisitions, alliances, and hiring new employees from competing firms. Cohen and Levinthal (1990) argue that such means are suboptimal because knowledge is often routine-based, tacit, and firm specific, and cannot be easily integrated in the firm. In contrast, Rosenkopf and Almeida (2003) and Song et al. (2003) found that firms hiring employees from others are able to produce innovations that depend on new and unrelated knowledge. Such ability is, however, likely dependent on how new employees are integrated and how their knowledge gradually develops the knowledge of the hiring firm.
Finally, the development of dynamic models is needed. Absorptive capacity is cumulative and essentially a dynamic process. Learning in one period will increase the stock of knowledge and improve learning in the subsequent period (Cohen and Levinthal, 1989, 1990). Studies have shown complementary knowledge and capabilities may be instrumental in creating innovations (Helfat, 1997; Nagarajan and Mitchell, 1998). However, complementary knowledge does not necessarily have to be related to existing knowledge. Longitudinal studies may uncover how firms make local moves to acquire knowledge in domains in which they do not possess previous knowledge.
Based on a review of existing insights, our chapter sought to identify the central problems in absorptive capacity research and forward promising prospects for future research. Our review will hopefully motivate researchers into further developing the absorptive capacity construct and advance the field of absorptive capacity in a more coherent way. The problems identified will hopefully encourage future research in examining additional antecedents and outcomes of absorptive capacity at multiple levels of analysis to get a better grasp of how firms develop their knowledge base and how they apply it to innovation.
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