Absorptive capacity theory

Acronym
N/A

Alternate name(s)
Theory of absorptive capacity

Main dependent construct(s)/factor(s)
Quantity of knowledge absorption, quantity of knowledge transfer, innovation, firm performance

Main independent construct(s)/factor(s)
Prior related knowledge

Concise description of theory
Absorptive capacity is a firm’s ability to identify, assimilate, transform, and apply valuable external knowledge. Put another way, absorptive capacity is a limit to the rate or quantity of scientific or technological information that a firm can absorb. Conceptually, it is similar to information processing theory, but at the firm level rather than the individual level. Absorptive capacity was introduced by Cohen and Levinthal in 1990.

Zahra and George (2002) extended the theory by specifying four distinct dimensions to absorptive capacity: acquisition, assimilation, transformation and exploitation. However, Todorova and Durisin (2007) seriously question Zahra and George's reconceptualization of absorptive capacity.

When absorption limits exist, they provide one explanation for firms to develop internal R&D capacities. R&D departments can not only conduct development along lines they are already familiar with, but they have formal training and external professional connections that make it possible for them to evaluate and incorporate externally generated technical knowledge into the firm. In other words, a partial explanation for R&D investments by firms is to work around the absorptive capacity constraint.

It is useful to note that almost all organizational literature, including Cohen and Levinthal’s (1989; 1990) original work, treats absorptive capacity as an organizational-level construct (Lane et al. 2006). Although absorptive capacity does have antecedents and consequences, it is not composed of a statement of relations among concepts within a set of assumptions and boundaries. Thus, absorptive link building service capacity is a construct, not a theory.

Modified from: http://economics.about.com/cs/economicsglossary/g/absorptive_cap.htm

Diagram/schematic of theory
N/A

Originating author(s)
Cohen and Levinthal (1990)

Seminal articles
Cohen W., and D. Levinthal. 1990. "Absorptive capacity: a new perspective on learning and innovation." Administrative Science Quarterly 35(1) pp 128-152. Henderson, R., and Cockburn, I. “Measuring Competence? Exploring Firm Effects in Pharmaceutical Research,” Strategic Management Journal (15:8), Winter Special Issue,1994, pp. 63-84. Nonaka, I. “A Dynamic Theory of Organizational Knowledge Creation,” Organization Science (5:1), 1994, pp. 14-37. Szulanski, G. “Exploring Internal Stickiness: Impediments to the Transfer of Best Practices Within the Firm,” Strategic Management Journal (17:10), 1996, pp. 27-43. Bosch, F. A., Volberda, H. W., and Boer, M. D. 1999. Coevolution of Firm Absorptive Capacity and Knowledge Environment: Organizational Forms and Combinative Capabilities. Organization Science 10, 5 (May. 1999), 551-568. Zahra, S. A., and George, G. “Absorptive Capacity: A Review, Reconceptualization, and Extension,” Academy of Management Review (27:2), 2002, pp. 185-203. Mowery, D. C., Oxley, J.E. et Silverman, B. S. (1996), “Strategic alliances and interfirm knowledge transfer”, Strategic Management Journal, Winter Special Issue, 17, pp. 77-92. Lane, P.J., Koka, B.R., and Pathak, S. 2006. "The Reification of Absorptive Capacity: A Critical Review and Rejuvenation of the Construct," Academy of Management Review (31:4), pp. 833-863. Todorova, G., and Durisin, B. 2007. "Absorptive Capacity: Valuing a Reconceptualization," Academy of Management Review (32:3), pp. 774-786.

Originating area
Strategic management, Organizational behavior

Level of analysis
Firm, group, inter-organizational dyad

IS articles that use the theory
Aladwani, A. M. “An Integrated Performance Model of Information Systems Projects,” Journal of Management Information Systems (19:1), 2002, pp. 185-210. Armstrong, C.P., and Sambamurthy, V. 1999. "Information Technology Assimilation in Firms: The Influence of Senior Leadership and It Infrastructures," Information Systems Research (10:4), Dec, pp. 304-327. Bharati, P., Zhang, C., and Chaudhury, A. (Forthcoming), “Social Media Assimilation in Firms: Investigating the Roles of Absorptive Capacity and Institutional Pressures,” Information Systems Frontiers, Springer. Boynton, A. C., Zmud, R. W., and Jacobs, G. C. 1994. The influence of IT management practice on IT use in large organizations. MIS Q. 18, 3 (Sep. 1994), 299-318. Faraj, S., and Sproull L. “Coordinating Expertise in Software Development Teams,” Management Science (46:12), 2000, pp. 1554-1568. Fichman, R.G. 2004. "Real Options and It Platform Adoption: Implications for Theory and Practice," Information Systems Research (15:2), Jun, pp. 132-154. Gold, A.H., Malhotra, A., and Segars, A.H. 2001. "Knowledge Management: An Organizational Capabilities Perspective," Journal of Management Information Systems (18:1), Summer, pp. 185-214. Gosain, S., Malhotra, A., and El Sawy, O.A. 2004. "Coordinating for Flexibility in E-Business Supply Chains," Journal of Management Information Systems (21:3), pp. 7-45. Griffith, T.L., Sawyer, J.E., and Neale, M.A. 2003. "Virtualness and Knowledge in Teams: Managing the Love Triangle of Organizations, Individuals, and Information Technology," MIS Quarterly (27:2), Jun, pp. 265-287. Ko, D.G., Kirsch, L.J., and King, W.R. 2005. "Antecedents of Knowledge Transfer from Consultants to Clients in Enterprise System Implementations," MIS Quarterly (29:1), Mar, pp. 59-85. Lee, J.-N. 2001. "The Impact of Knowledge Sharing, Organizational Capability and Partnership Quality on Is Outsourcing Success," Information & Management (38), pp. 323-335. Liang, H., Saraf, N., and Hu, Q. 2007. "Assimilation of Enterprise Systems: The Effect of Institutional Pressures and the Mediating Role of Top Management," MIS Quarterly (31:1), pp. 59-87. Malhotra, A., Gosain, S., and El Sawy, O.A. 2005. "Absorptive Capacity Configurations in Supply Chains: Gearing for Partner-Enabled Market Knowledge Creation," MIS Quarterly (29:1), Mar, pp. 145-187. Nelson, K., and Cooprider, J. “The Contribution of Shared Knowledge to IS Group Performance,” MIS Quarterly (20:4), December 1996, pp. 409- 429. Park, J.-H., Suh, H.-J., and Yang, H.-D.. 2007. "Perceived Absorptive Capacity of Individual Users in Performance of Enterprise Resource Planning (ERP) Usage: The Case for Korean Firms," Information & Management (44:3), pp. 300-312. Pavlou, P.A., and El Sawy, O.A. 2006. "From It Leveraging Competence to Competitive Advantage in Turbulent Environments: The Case of New Product Development," Information Systems Research (17:3), Sep, pp. 198-227. Pawlowski, S. D., and Robey, D., Bridging user organizations: Knowledge brokering and the work of information technology professionals. MIS Quarterly, 28, 4, 2004: 645-672. V. Sambamurthy, Robert W. Zmud, Arrangements for information technology governance: a theory of multiple contingencies, MIS Quarterly, v.23 n.2, p.261-290, June 1999. Schilling, M. A., Vidal, P., Ployhart, R. E., and Marangoni, A. 2003. Learning by Doing Something Else: Variation, Relatedness, and the Learning Curve. Manage. Sci. 49, 1 (Jan. 2003), 39-56. Srivardhana, T., and Pawlowski, S.D. 2007. "Erp Systems as an Enabler of Sustained Business Process Innovation: A Knowledge-Based View," Journal of Strategic Information Systems (16:1), pp. 51-69. Tiwana, A., and McLean, E.R. 2005. "Expertise Integration and Creativity in Information Systems Development," Journal of Management Information Systems (22:1), Sum, pp. 13-43.

Links from this theory to other theories
Information processing theory, Dynamic capabilities, Transactive memory theory, Organizational information processing theory

Original Contributor(s)
Mike Wade

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