Absorptive capacity of the firm

Absorptive capacity is a set of capabilities of the firm which enable it to recognise,acquire, assimilate and apply toward commercial purposes the technology andknowledge available in its external environment (Cohen and Levinthal (1990)).What are these capabilities?This thesis has three aims: to identify the capabilities which constitute absorptivecapacity; to design a change management model which the firm can apply to develop itscapabilities for absorption; and to identify issues for further research.The scope of the research is absorption by the firm of existing technology from externalsources, which the firm applies without significantly changing the technology andassociated processes. The thesis does not consider the absorption of technology forapplication to inventions and creating new products.A new concept of adsorption is introduced, whereby the firm obtains access totechnology, but does not grasp the technology to change its internal processes or forinnovation. Absorption includes the latter, and is therefore fundamentally related tochange management.As a step towards identifying capabilities for absorption, qualitative empirical study intotwo case study firms, each of which seeks to improve its performance by the absorptionof technology, was conducted. The Todorova and Durisin (2007) model of absorptivecapacity is the main construct for the empirical research. It comprises four sequentialcapabilities: recognition of the value of knowledge or technology; acquisition;transformation or assimilation (as alternatives); and exploitation.From the empirical evidence, features of the capabilities were derived inductively:absorptive capacity (that is, the capabilities) may vary as a function of level (operational to strategic) in the firm; absorptive capacity varies with management function;absorptive capacity is a function of the nature of technology and peoples interest in thetechnology; a firm which is effective in some phases of absorption processes may notnecessarily be effective in other phases; and absorptive capacity is directly a function ofsocial networking and cumulative learning capabilities.Absorptive capacity is therefore not a single general capability of the firm. The evidence that social networking and cumulative learning are capabilities of absorptive capacity is recommended for further quantitative research across a wide selection of case study firms.A new model for change management is presented as a construct by which the firm candevelop and manage its capabilities for technology absorption. The thesis then concludes with recommendations for research into strategic and changemanagement dimensions of absorptive capacity