Marion Frenz and Grazia Ietto-Gillies
James Boswell (1946 : 227) reports his mentor Dr Johnson (1709-1784) stating that: “…a man must carry knowledge with him, if he would bring home knowledge”. Nowadays we would change the first two words with ‘…a person…’. Nonetheless, researchers in innovation studies cannot fail to notice how well and concisely the statement describes the concept of absorptive capacity (ACAP) to which much attention has been devoted by the economics and management communities. Most of the literature in ACAP started with the classic contributions – some two centuries later than Dr Johnson’s – by Cohen and Levinthal (C&L) (1989, 1990 and 1994) and, later, Zahra and George (2002). Doctor Johnson was thinking of the potential for knowledge acquisition by a single individual, indeed a man, and not societies in general. Cohen and Levinthal concentrated on the firm as carrier and receiver of knowledge. They (1989: 569) define absorptive capacity as: “the firm’s ability to identify, assimilate and exploit knowledge from the environment…”. Later works have extended the contribution to countries and regions. There is now a very large body of published works on ACAP; our recent search of the Social Science Citation Index found 741 articles with ACAP in the title.
We have been working on the problem of developing indicators of absorptive capacity on and off for several years and we have just completed and submitted a paper on the subject with the following specificities. We consider several dimensional indicators and to each of them we incorporate the contribution of a variety of variables. The dimensions are selected to be policy-relevance in the sense that to each of them specific policies can, potentially, be applied. The main dimensions relate to the following: knowledge intensity; human resources; social connectivity; and physical connectivity. The ACAP indicator is calculated from adding together values for the various indicators. The latter are the ones to which we attach most relevance because of their policy specificity.
We estimate dimensional and ACAP indicators for 24 European countries and for 24 sectors of the UK economy. The latter study gives separate estimates for large and medium-size companies within each sector. The data for the macro study comes from several international and EU sources; for the UK sectors’ study we use data from the Community Innovation Survey (CIS) for the UK.
The sector study, as much as the choice of dimensions, is inspired by policy-relevance. We discuss the desirability of concentrating on sectors, rather than the macro economy only, in terms of innovation policy (Almudi et al. 2020).
Our results reveal the following. On the whole countries as well as sectors tend to do well or poorly in all or most dimensions which may mean that improvements in one or two dimensions will lead to improvements in others, possibly leading to a virtuous circle and vice versa. At the sectors level the results for the UK appear to be more industry-specific than size-specific. This may mean that in the UK policies for increased ACAP may have to be directed less to the firms’ size and more to the sector they operate in. The effects of policies may then spread downward to smaller size enterprises and upward to the macro level.
We end our conclusions by urging the development of ‘conventions’ on how to arrive at counties/regions/sectors measurements of absorptive capacity in order to be able to make comparisons across countries, regions and sectors and to guide on policies.
The full study is currently submitted for publication. For more information about this work, please contact the authors Dr Marion Frenz (firstname.lastname@example.org) or Prof Grazia Ietto-Gillies (email@example.com).
Almudi, I., Fatas-Villafranca, F., Fernandez-Marquez, C. M., Potts, J. and Vasquez, F.J., (2020) Absorptive Capacity in a two-sector neo-Schumpeterian model: a new role for innovation policy, Industrial and Corporate Change, 29, 2: 507-531.
Boswell, J. (1946 ) The Life of Samuel Johnson, L.L.D., London: Geoffrey Cumberledge and Oxford University Press.
Cohen, W. M. and Levinthal, D. A. (1989) Innovation and learning: the two faces of R&D, The Economic Journal, 99, 397: 569-596.
Cohen, W. M. and Levinthal D. A. (1990) Absorptive capacity: a new perspective on learning and innovation, Administrative Science Quarterly, 35, 1: 128-152.
Cohen, W. M. and Levinthal D. A. (1994) Fortune favors the prepared firm’, Management Science, 40, 2: 227-251.
Frenz, M. and Ietto-Gillies, G. (2022), ‘Indicators of absorptive capacity: a policy-led, dimensional approach. Theoretical framework and estimates for 24 countries and 24 UK sectors.’ (mimeo, submitted for publication).
Zahra, S, A, and George, G., (2002) Absorptive capacity: A review, reconceptualization and extension, Academy of Management, 27, 2: 185-203.