Abstract
Absorptive Capacity (ACAP) has been widely used in the literature to explain how external knowledge can be utilized for innovative purposes, generating mixed results. However, despite it being foundational to theories of knowledge and innovation, we know very little about the knowledge content of ACAP and how it might affect innovation. Understating this content can help in addressing the questions about ACAP's antecedents, its evolution, its multi-level nature, and its relationship with innovation. It can also advance our knowledge of the structural aspects of the knowledge network that makes up ACAP. We attempt to accomplish this by invoking Simon's notion of decomposability (i.e., the ability to partition knowledge into meaningful units). Specifically, we categorize the different knowledge structures that make up ACAP. This enables us to show how ACAP emerges, evolves over time and the mechanism by which it acts to affect the magnitude and speed of innovation. Our discussion highlights micro foundations of the knowledge content of ACAP and how it can be used across multiple levels of analysis.
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