Absorptive Capacity

Business, Legal & Accounting Glossary

Definition: Absorptive Capacity

Absorptive Capacity

Full Definition of Absorptive Capacity

A limit to the rate or quantity of scientific or technological information that a firm can absorb. If such limits exist they provide one explanation for firms to develop internal R&D; capacities. R&D; departments can not only conduct development along lines they are already familiar with, but they have formal training and external professional connections that make it possible for them to evaluate and incorporate externally generated technical knowledge into the firm better than others in the firm can. In other words, a partial explanation for R&D; investments by firms is to work around the absorptive capacity constraint.

This term comes from Cohen and Levinthal (1990).

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Definition Sources

Definitions for Absorptive Capacity are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 20th March, 2020 | 0 Views.