Absorptive capacity

In business administration, absorptive capacity has been defined as 'a firm's ability to recognize the value of new information, assimilate it, and apply it to commercial ends'. It is studied on individual, group, firm, and national levels. Antecedents are prior-based knowledge (knowledge stocks and knowledge flows) and communication. Studies involve a firm's innovation performance, aspiration level, and organizational learning. It has been said that in order to be innovative an organization should develop its absorptive capacity. In business administration, absorptive capacity has been defined as 'a firm's ability to recognize the value of new information, assimilate it, and apply it to commercial ends'. It is studied on individual, group, firm, and national levels. Antecedents are prior-based knowledge (knowledge stocks and knowledge flows) and communication. Studies involve a firm's innovation performance, aspiration level, and organizational learning. It has been said that in order to be innovative an organization should develop its absorptive capacity. The concept of absorptive capacity was first defined as a firm's 'ability to recognize the value of new information, assimilate it, and apply it to commercial ends' by Cohen and Levinthal. For them, absorptive capacity depends greatly on prior related knowledge and diversity of background. The investments a firm makes into its research and development (R&D) efforts are therefore central to their model of development of absorptive capacity. The absorptive capacity is seen as cumulative, meaning that it is easier for a firm to invest on a constant basis in its absorptive capacity than investing punctually. Efforts put to develop absorptive capacity in one period will make it easier to accumulate it in the next one.