In this paper, we argue that the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends is critical to its innovative capabilities. We label this capability a firm's absorptive capacity and suggest that it is largely a function of the firm's level of prior related knowledge. The discussion focuses first on the cognitive basis for an individual's absorptive capacity including, in particular, prior related knowledge and diversity of background. We then characterize the factors that influence absorptive capacity at the organizational level, how an organization's absorptive capacity differs from that of its individual members, and the role of diversity of expertise within an organization. We argue that the development of absorptive capacity, and, in turn, innovative performance are history- or path-dependent and argue how lack of investment in an area of expertise early on may foreclose the future development of a technical capability in that area. We formulate a model of firm investment in research and development (R&D), in which R&D contributes to a firm's absorptive capacity, and test predictions relating a firm's investment in R&D to the knowledge underlying technical change within an industry. Discussion focuses on the implications of absorptive capacity for the analysis of other related innovative activities, including basic research, the adoption and diffusion of innovations, and decisions to participate in cooperative R&D ventures. **

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Absorptive capacity: a new perspective on learning and innovation

This paper focuses on dynamic capabilities and, more generally, the resource-based view of the firm. We argue that dynamic capabilities are a set of specific and identifiable processes such as product development, strategic decision making, and alliancing. They are neither vague nor tautological. Although dynamic capabilities are idiosyncratic in their details and path dependent in their emergence, they have significant commonalities across firms (popularly termed ‘best practice’). This suggests that they are more homogeneous, fungible, equifinal, and substitutable than is usually assumed. In moderately dynamic markets, dynamic capabilities resemble the traditional conception of routines. They are detailed, analytic, stable processes with predictable outcomes. In contrast, in high-velocity markets, they are simple, highly experiential and fragile processes with unpredictable outcomes. Finally, well-known learning mechanisms guide the evolution of dynamic capabilities. In moderately dynamic markets, the evolutionary emphasis is on variation. In high-velocity markets, it is on selection. At the level of RBV, we conclude that traditional RBV misidentifies the locus of long-term competitive advantage in dynamic markets, overemphasizes the strategic logic of leverage, and reaches a boundary condition in high-velocity markets. Copyright © 2000 John Wiley & Sons, Ltd.

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Dynamic capabilities, what are they?

This paper differs from previous examinations of organizational learning in that it is broader in scope and more evaluative of the literatures. Four constructs related to organizational learning knowledge acquisition, information distribution, information interpretation, and organizational memory are articulated, and the literatures related to each are described and critiqued.

The literature on knowledge acquisition is voluminous and multi-faceted, and so the knowledge acquisition construct is portrayed here as consisting of five subconstructs or subprocesses: 1 drawing on knowledge available at the organization's birth, 2 learning from experience, 3 learning by observing other organizations, 4 grafting on to itself components that possess knowledge needed but not possessed by the organization, and 5 noticing or searching for information about the organization's environment and performance. Examination of the related literatures indicates that much has been learned about learning from experience, but also that there is a lack of cumulative work and a lack of integration of work from different research groups. Similarly, much has been learned about organizational search, but there is a lack of conceptual work, and there is a lack of both cumulative work and syntheses with which to create a more mature literature. Congenital learning, vicarious learning, and grafting are information acquisition subprocesses about which relatively little has been learned.

The literature concerning information distribution is rich and mature, but an aspect of information distribution that is central to an organization's benefitting from its learning, namely how units that possess information and units that need this information can find each other quickly and with a high likelihood, is unexplored. Information interpretation, as an organizational process, rather than an individual process, requires empirical work for further advancement. Organizational memory is much in need of systematic investigation, particularly by those whose special concerns are improving organizational learning and decision making.

https://www.jstor.org/stable/pdfplus/2634941.pdf

Organizational Learning: The Contributing Processes and the Literatures

The ability to transfer best practices internally is critical to a firtn's ability to build competitive advantage through the appropriation of rents from scarce internal knowledge. Just as a firm's distinctive competencies tnight be dificult for other firms to imitate, its best prczctices could be dfficult to imitate internnlly. Yet, little systematic attention has been pcrid to such internal stickiness. The author analyzes itlterrzal stickiness of knowledge transfer crnd tests the resulting model using canonical correlation analysis of a data set consisting of 271 observations of 122 best-practice transfers in eight companies. Contrary to corzverztiorzrzl wisdom that blames primarily motivational factors, the study findings show the major barriers to internal knowledge transfer to be knowledge-related factors such as the recipient's lack oj absorptive capacity, causal anzbiguity, and an arciuous relationship between the source and the recipient. The identification and transfer of best practices cally are hindered less by confidentiality and legal is emerging as one of the most important and obstacles than external transfers, they could be widespread practical management issues of the faster and initially less complicated, all other latter half of the 1990s. Armed with meaningful, things being equal. For those reasons, in an era detailed performance data, firms that use fact- when continuous organizational learning and based management methods such as TQM, bench- relentless performance improvement are needed to marking, and process reengineering can regularly remain competitive, companies must increasingly compare the performance of their units along resort to the internal transfer of capabilitie~.~ operational dimensions. Sparse but unequivocal Yet, experience shows that transferring capaevidence suggests that such comparisons often bilities within a firm is far from easy. General reveal surprising performance differences between Motors had great difficulty in transferring manuunits, indicating a need to improve knowledge facturing practices between divisions (Kerwin and utilization within the firm (e.g., Chew, Bresnahan, Woodruff, 1992: 74) and IBM had limited suc

https://onlinelibrary.wiley.com/doi/pdf/10.1002/smj.4250171105

Exploring internal stickiness: Impediments to the transfer of best practice within the firm

A central part of the innovation process concerns the way firms go about organizing search for new ideas that have commercial potential. New models of innovation have suggested that many innovative firms have changed the way they search for new ideas, adopting open search strategies that involve the use of a wide range of external actors and sources to help them achieve and sustain innovation. Using a large-scale sample of industrial firms, this paper links search strategy to innovative performance, finding that searching widely and deeply is curvilinearly (taking an inverted U-shape) related to performance. Copyright © 2005 John Wiley & Sons, Ltd.

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Open for innovation: the role of openness in explaining innovation performance among U.K. manufacturing firms

The Not-Invented-Here (NIH) syn- drome is defined as the tendency of a project group of stable composition to believe it pos- sess~~ a monopoly of knowledge of its field, which leads it to reject new ideas from outsiders to the likely detriment of its performance. The authors have carried out an empirical test of the extent to which the rate of communica- tion between a project group and the outside world decreases with mean project tenure and how far performance decreases with project tenure. The study, carried out in a large laboratory, shows that performance increases up to 1.5 years tenure, stays steady for a time but by five years has declined noticeably. This tendency is best accounted for by the marked decline in communication rate among group members and between them and critical external sources of information. The authors analyse the significance of this finding and suggest means of maintaining the vitality of long-standing project teams.

Investigating the Not Invented Here (NIH) syndrome: A look at the performance, tenure, and communication patterns of 50 R & D Project Groups

In his research on engineering project teams, for example, Allen (1977) carefully demonstrated that only 11 percent of the sources of new ideas and information could be attributed to written media; the rest ocurred through interpersonal communications. This study investigated the communication behaviors and performances of 50 R&D project groups that varied in terms of group longevity, as measured by the average length of time project members had worked together. Analyses revealed that project groups became increasingly isolated from key information sources both within and outside their organizations with increasing stability in project membership. Such reductions in project communication were also shown to affect adversely the technical performance of project groups. Furthermore, variations in communication activities were more associated with the tenure composition of project groups than with the project tenures of individual engineers. These findings are presented and discussed in the more general terms of what happens in project groups with increasing group longevity.

The Effects of Group Longevity on Project Communication and Performance.

Research indicates that certain boundary spanning individuals, labelled gatekeepers, can be an important linking mechanism between organizations and their external environments. This study investigates the role of gatekeepers in the transfer of information in a single RD they appear to facilitate the external communication of their more local project colleagues. Direct contact and contact mediated by gatekeepers, then, are two contrasting ways to link project groups with their external areas. The relative effectiveness of these linking mechanisms is contingent on the nature of the project's work.

https://www.jstor.org/stable/pdfplus/2631174.pdf

External Communication and Project Performance: An Investigation Into the Role of Gatekeepers

This study examines the impacts of problem-solving and administrative communication patterns on the technical performance of 61 projects in an industrial R&D laboratory. While there were no differences in the relative patterns of these two types of communication, there were systematic differences in the mechanisms by which project groups transferred administrative and problem-solving information with other areas both within and outside the organization. The overall patterns of communication were influenced by the nature of the projects' work, while the effectiveness of the various interfaces was explored via two contrasting methods: (1) direct contact by all project members and (2) contact mediated through boundary spanning individuals. The effectiveness of each of these linking mechanisms was also contingent upon the projects' tasks. This research reinforces the importance of managing communication patterns in organizations and further supports the importance of boundary spanning individuals.

Communication Patterns, Project Performance and Task Characteristics: An Empirical Evaluation and Integration in an R&d Setting

This study investigates the relationships between overall job satisfaction and the five task dimensions of skill variety, task identity, task significance, autonomy, and feedback-from-job for employees at different stages of their careers, as measured by their length of employment on their current jobs, as well as in their current organizations. Basically, the analysis shows that the strength of the relationships between job satisfaction and each of the task dimensions depends on both the job longevity and organizational longevity of the sampled individuals. For employees new to an organization, for example, only task significance is related positively to job satisfaction, while autonomy has a strongly negative correlation. The study presents other significant correlational differences and discusses the implications of its findings for task design, as well as for managing new employees. Approximately 3500 respondents from four different governments--two metropolitan, one county, and one state--participated in the collection of survey data.

Ralph Katz

Papers

Investigating the Not Invented Here (NIH) syndrome: A look at the performance, tenure, and communication patterns of 50 R & D Project Groups

The Effects of Group Longevity on Project Communication and Performance.

External Communication and Project Performance: An Investigation Into the Role of Gatekeepers

Communication Patterns, Project Performance and Task Characteristics: An Empirical Evaluation and Integration in an R&d Setting

Job Longevity as a Situational Factor in Job Satisfaction.