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Absorptive Capacity in High-Technology Markets: The Competitive Advantage of the Haves

Carlson School of Management, University of Minnesota, 321 19th Avenue South, Minneapolis, Minnesota 55455
Business School, National University of Singapore, BIZ 1, FBA1 04-15, 1 Business Link, Singapore 117592
Marshall School of Business, University of Southern California, ACC 301, Los Angeles, California 90089-1421
onarasimhan{at}csom.umn.edu
srajiv{at}nus.edu.sg
sdutta{at}marshall.usc.edu

The rapid rate of knowledge obsolescence in many high-technology markets makes it imperative for firms to renew their technological bases constantly. Given its critical importance, excellence in renewal of technological base would serve as a dynamic capability. Drawing on past literature, we identify this dynamic capability associated with acquiring and utilizing external technological know-how with the notion of absorptive capacity (AC).

We ask the following questions: (a) What would cause some firms to have a higher AC than others? and, (b) What is the impact of AC on a firm’s profitability?

We build a conceptual framework suggesting that marketing, R&D, and operations capabilities have a significant positive impact on a firm’s AC. We test our framework on a data set of firms in high-technology markets. Using an econometric technique called stochastic frontier estimation, we infer the AC of firms from an observation of the know-how they actually absorb. We find that firm-specific capabilities significantly impact AC. Also, we find that AC has a significant impact on profitability and that this impact is moderated by the pace of technological change: the greater the pace of change, the greater the impact.

Key Words: absorptive capacity; dynamic capabilities; high-technology markets; resource-based view; marketing capability; organizational learning; knowledge acquisition
History: Received: August 16, 2001;

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