Why you need to know about absorptive capacity

For creativity and innovation to manifest within a company, absorptive capacity is key.

Organizational learning and knowledge creation ultimately help shape a company’s ability to innovate. Especially the knowledge flows across networks positively affect the organizational capabilities.

But this knowledge creation are often restricted to parts of the organization sharing the same education and background, and few from the outside are involved. This “cognitive trap” where ideas are locked in a specific “thought world’, dampens the variations required for novelty to emerge.

Cohen and Levinthal (1990) view identifying, interpreting and exploiting knowledge as a critical component of the innovation process. They coined the term absorptive capacity, meaning “the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends” (p.128).

Absorptive capacity helps us in understanding how innovation occurs in a team – both cognitively within individuals and the interaction between them. Especially within the knowledge economy that we live in, much learning happens within a social context. Make sure to open up and optimize your absorptive capacity as often as you can. It will most certainly bring in new knowledge you can store or make use of, often with great results.

This text is based on the following research paper:

Cohen, W.M., and Levinthal, D.A. (1990) Absorptive Capacity: A New Perspective on Learning and Innovation. Administrative Science Quarterly, 35, 128–52.