Dynamic Absorptive Capability and Innovation Performance: Evidence from Chinese Cities

Abstract

Absorptive capability is the capability of actors to acquire, assimilate and exploit external knowledge. In this paper, we consider absorptive capability to be multi-dimensional and to have three dimensions. Although a sufficient amount of work in the literature discusses dynamic absorptive capability, empirical studies are relatively rare. At the urban or regional levels, related empirical studies are even fewer. In this paper, we build a framework of the dynamic absorptive capability at the urban level by using 339 Chinese cities at the prefecture level and above as our sample. In order to take the geographical distance into consideration, we use a Spatial Durbin Model to measure the effects of the acquirement, assimilation, and exploitation of absorptive capability. The results show that all of the core variables (acquirement, assimilation, and exploitation) have significant positive impacts on innovation performance. Additionally, the two control variables (R&D personnel and R&D investment) have significant positive impacts on innovation performance. In this way, the role performed by multidimensional absorptive capability in fostering innovation performance is highlighted, and some policy recommendations are provided.