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Absorptive capacity is an organizational ability to evaluate, assimilate and commercialize knowledge that originates outside the firm. Cohen and Levinthal popularized the concept with their model describing R&D as having dual roles as a source of innovation and as a means of enhancing the firm’s ability to learn. In the large literature that developed, many studies follow this logic to link absorptive capacity to factors that shape the flow of knowledge across organizations such as firms’ social networks or search patterns. Other studies emphasize the firm’s routine behaviours and the link to performance outcomes in the context of firm-level activities including technology sourcing, alliances, innovation and strategic renewal.

Definition Absorptive capacity is the ability of a firm to recognize, assimilate and commercialize the value of external knowledge (Cohen and Levinthal 1989, 1990). Cohen and Levinthal viewed this ability as a function of firm-specific investments, most notably the firm’s prior relevant R&D. Over