What Determines Absorptive Capacity

The paper empirically analyses the effect of R&D activities, human resource and knowledge management, and the organisation of knowledge sharing within a firm on the absorptive capacity of innovative firms. Using data from the German innovation survey we investigate how firms are able to exploit knowledge from external partners for successful innovation activities. We distinguish between three types of absorptive capacity for three different types of knowledge, namely absorptive capacity to use knowledge from a firm’s own industry, from other industries, and knowledge from research institutions. The estimation results show that the determinants of absorptive capacities differ with respect to the type of knowledge absorbed for innovation activities. In particular we find that the R&D intensity does not significantly influence absorptive capacity. Additionally, our results suggest that absorptive capacity is path-dependent and firms can influence their ability to exploit external knowledge by stimulating the involvement of individuals in innovation projects of a firm.