Absorptive capacity and technology sourcing: Implications for responsiveness of established firms
Abstract
This study addresses the question of why some established firms are more effective than others at responding to competency-destroying technological discontinuities. The central thesis is that responsiveness is a function of how firms develop their 'absorptive capacity', which has been defined as the ability to evaluate, assimilate and apply outside technological knowledge to commercial ends (Cohen and Levinthal 1989, 1990). A conceptual model is developed which explains the determinants of absorptive capacity, in terms of the firm's ability to (a) acquire the technology relevant to the new regime, and (b) integrate externally sourced technology into its existing capabilities. The propositions emerging from the model are tested using data obtained from a sample of twenty-six established firms in the U.S. pharmaceutical industry. Incumbent firms in this industry were faced with a technological discontinuity when, in the mid 1970's, universities and new firms began to apply biotechnology to the development of diagnostic and therapeutic products. Data were obtained from both primary and secondary sources for the ten year period from 1981 to 1991. Nonparametric methods were used to test the hypotheses that firms with high levels of absorptive would have higher measures on the independent variables than firms with low levels of absorptive capacity. Absorptive capacity is operationalized using the following measures: the number of patents the firm holds in biotechnology; the number of biotechnology products that the firm has commercialized, and; the firm's reputation for having expertise in biotechnology. Substantial support was found for the model. Firms with high levels of absorptive capacity (a) invested more in internal R&D, which enabled them to monitor new developments, (b) were more aggressive in using different types of alliances to develop their technological capabilities, (c) used equity-based ownership modes more frequently when their alliances had high learning requirements, (d) had more in-house expertise in the technologies which they pursued in alliances, (e) had more experience using alliances and working with specific alliance partners, and (f) were more diligent in using and acknowledging the importance of mechanisms to facilitate communication with their alliance partners.
Degree
Ph.D.
Advisors
Woo, Purdue University.
Subject Area
Management
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