Absorptive Capacity and Innovation: When Is It Better to Cooperate?

Abiodun Egbetokun, Ivan Savin*

*Corresponding author for this work

Research output: Chapter in BookChapterResearchpeer-review

3 Citations (Scopus)

Abstract

Cooperation can benefit and hurt firms at the same time. An important question then is: when is it better to cooperate? And, once the decision to cooperate is made, how can an appropriate partner be selected? In this paper we present a model of inter-firm cooperation driven by cognitive distance, appropriability conditions and external knowledge. Absorptive capacity of firms develops as an outcome of the interaction between absorptive R&D and cognitive distance from voluntary and involuntary knowledge spillovers. Thus, we offer a revision of the original model by Cohen and Levinthal (Econ J 99(397):569–596, 1989), accounting for recent empirical findings and explicitly modeling absorptive capacity within the framework of interactive learning. We apply that to the analysis of firms’ cooperation and R&D investment preferences. The results show that cognitive distance and appropriability conditions between a firm and its cooperation partner have an ambiguous effect on the profit generated by the firm. Thus, a firm chooses to cooperate and selects a partner conditional on the investments in absorptive capacity it is willing to make to solve the understandability/novelty trade-off.

Original languageEnglish
Title of host publicationEconomic Complexity and Evolution
PublisherSpringer Science and Business Media Deutschland GmbH
Pages373-399
Number of pages27
DOIs
Publication statusPublished - 2015

Publication series

NameEconomic Complexity and Evolution
ISSN (Print)2199-3173
ISSN (Electronic)2199-3181

Keywords

  • Absorptive Capacity
  • External Knowledge
  • Knowledge Spillover
  • Knowledge Stock
  • Potential Partner

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