Absorptive capacity is intended to encourage organizations to improve their prospects by conducting their own custom research and development (R&D).
Absorptive capacity is a method by which an organization processes new information and translates it for its own business benefit. This includes determining what new information is useful and applying it to the organization to produce tangible results. The term also refers to the amount of new information that an organization can productively manage.
The concept was created by professors Wesley Cohen and Daniel Levinthal in 1990. One of their main goals was to encourage organizations to improve their prospects by pursuing their own personalized research and development (R&D) rather than acquiring more information. general. In addition to acquiring information from outside the organization, the method requires that knowledge already held by the entity be integrated into any action inspired by new data.
Absorptive capacity should be an ongoing process for any organization that adopts your ideas. It requires a constant commitment to changes in the economy, in specific markets and in the businesses of competitors. The process also involves integrating information that is not currently part of an organization’s operations to make it relevant and useful.
In the years since its introduction, the definition of absorptive capacity has expanded to take into account real-world applications. One of the most widely adopted settings was created in 2002, when Professors Shaker Zahra and Gerry George added the idea that the method was realistically composed of two concepts: realized absorptive capacity (RACAP) and potential absorptive capacity (PACAP). ). This new point of view makes it easy to assess what an organization has done with new information and strategize about how to use the new data more effectively in the future.
Zahra and George’s theory also considered four more elements of absorptive capacity in addition to the two general categories. These are acquisition, assimilation, transformation and exploitation. The creation of these categories improved the business evaluation process in the main stages of the process. Zahra and George also provided categories to which specific benchmarks could be assigned to facilitate addressing any gaps in an organization’s absorptive capacity program.
While absorptive capacity can help an organization use information more effectively, it is also inherently limited. Its usefulness depends on the skill and ingenuity of the employees using the method. While the results are better tailored to specific needs, employees may only have a limited view of the operations as a whole.