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In this paper, we analyse the role of international patent collaborations in the performance of domestic firms and how the relationship is augmented by the pre-existing capabilities of the domestic firms. Using data on Indian firms, we study patterns of co-invention by Indian firms and foreign partners. The results confirm the crucial role played by the absorptive capacity of domestic firms in enhancing the benefits from the patent collaboration. The evidence we present in this work contributes to existing knowledge on the microeconomics behind the process of technological capability accumulation and catching up in developing countries.∗ Corresponding author: Nanditha Mathew, UNU-MERIT, Boschstraat 24, 6211 AX Maastricht, Netherlands. email: mathew@ merit. unu. edu