The Evolution of Absorptive Capacity Routines in Corporate R&D Subsidiaries

Abstract

Abstract: The literature on absorptive capacity (AC) routines points out that a firm’s ability to innovate is influenced by the configuration of its internal and external AC routines. The normative outcome of this stream of research points towards a ‘balance’ between internal and external AC routines as the ideal configuration. However since AC routines enable organizational units to tap into specific sources of knowledge, we would expect the adoption and effectiveness of these AC routines to be influenced by what source of knowledge the unit needs in the first place. In this study we argue that the dominant logic of organizing R&D resources assigns mandates to investments that focus the attention of the managers on certain opportunities more than others. We propose that a unit’s mandate to pursue an exploitative or explorative innovation objective is a central pillar in our understanding of how the balance between internal and external AC routines is skewed either way. We test this ideas of interaction b...