Knowledge and learning have become central to a firm’s innovativeness and competitiveness (Argote and Ingram, 2000; Bogner and Bansal, 2007; Van Wijk et al., 2008). Since valuable, relevant knowledge is often located outside firms’ boundaries, the ability of firms and their units to acquire knowledge from external constituents has become a critical capability. The importance of the ability to acquire external knowledge has rendered absorptive capacity arguably one of the most prominent constructs examined in organizational research. Two papers by Cohen and Levinthal (1989, 1990) are generally heralded as the seminal contributions and have since been cited extensively in journals associated with a variety of disciplines, ranging from economics to sociology to psychology. According to the Social Sciences Citation Index, more than 4000 studies have cited the two seminal articles, and if the current popularity of the construct is a harbinger of the future, many more are to be expected.
Following Cohen and Levinthal (1989, 1990), absorptive capacity emerges as a by-product of research and development, and the stock of knowledge developed confers on firms the ability to recognize the value of new external knowledge, assimilate it, and apply it to commercial ends. These three capabilities play a critical role in a firm’s innovativeness and influence the speed, frequency, and magnitude of innovation (Lewin et al., 2010). Even though prior research has produced a wealth of insights on the functioning and value of absorptive capacity, only a limited number of studies have discussed its scope and sought to further develop it (Lane et al., 2006). Studies have relied on a wide variety of measures to gauge absorptive capacity, including patent-based measures, scales, and, consistent with Cohen and Levinthal (1990), notably research and development-based measures. Since many measures do not capture the richness of the construct and overlap with measures typically used for other prominent constructs, such as knowledge transfer and innovation, our understanding of the nomological network of absorptive capacity has been impeded. As a result, several studies have attempted to redefine the construct (e.g. Lane and Lubatkin, 1998; Lim, 2009). What is more, studies even sought to refine (Matusik and Heeley, 2005; Todorova and Durisin, 2007), reconceptualize (Zahra and George, 2002), reify (Lane et al., 2006), and rejuvenate (Volberda et al., 2010) the construct. Calls have also been made for a process perspective that uncovers the microfoundations of absorptive capacity (Easterby-Smith et al., 2008; Lewin et al., 2010).
The popularity of absorptive capacity has led scholars to empirically examine its relation to a variety of antecedents and outcomes in different contexts (Jansen et al., 2005; Lane et al., 2001; Lane and Lubatkin, 1998; Lichtenthaler, 2009; Mowery et al., 1996; Szulanski, 1996; Van den Bosch et al., 1999). In line with Cohen and Levinthal (1990), studies have particularly examined the role of absorptive capacity in innovation, but studies have also appeared considering knowledge transfer and performance as outcomes. Antecedents identified in prior research relate to the characteristics of the knowledge itself, to the organization in which it is developed, and to the dyad or network in which it is applied. In addition to a mediating role in explaining innovativeness and performance, studies have also assessed the extent to which absorptive capacity moderates relationships where innovation is the outcome (e.g. Rothaermel and Alexandre, 2009; Tsai, 2009). Because absorptive capacity has appeared an elusive construct and measuring it is fraught with difficulty, however, the insights gained on its antecedents and outcomes harbor suspicion.
In this chapter, we review the literature on absorptive capacity with the aim to advance the construct in a more coherent way. We assess the progress made in the past two decades and seek to uncover problems and prospects for future research. The chapter is structured as follows. First, based on the seminal contributions of Cohen and Levinthal (1989, 1990), we provide an overview of how the definition of absorptive capacity has evolved, the levels of analysis involved and how studies have measured the construct. Specifically, we assess the refinements, extensions, and reconceptualizations of the construct in the literature. Then, we review outcomes and antecedents heeded in prior research. Specifically, we distinguish between antecedents relating to the knowledge absorbed itself, the organization in which it is developed, and the network in which organizations operate. Next, we review more recent studies that have examined the moderating role of absorptive capacity in explaining innovation. Finally, based on this review, we address the progress made, identify central problems, and forward promising future research directions.