A Functional Perspective on Learning and Innovation: Investigating the Organization of Absorptive Capacity

Abstract

We investigate the intra-organizational antecedents of firm-level absorptive capacity (AC). Specifically, we examine how the functional areas of R&D, manufacturing and marketing contribute to the absorption of knowledge coming from different external knowledge sources. The econometric results on a representative sample of Swiss firms show that non-R&D-based AC plays a significantly different role compared to the standard R&D-based one that is typically considered in studies on AC. We also reveal that AC is organized through a specialization of external knowledge absorption across functional areas. In particular, we find: (1) R&D is particularly important as an absorber of knowledge from public research organizations for product innovation; (2) manufacturing is important as an absorber of supplier knowledge for product innovation and of competitor knowledge for process innovation, and (3) marketing helps to absorb customer knowledge for product and process innovation as well as competitors’ knowledge for product innovation. We further investigate the differences between product and process innovation and find that marketing-based AC is more important for the former, although the overall analysis of these differences is less conclusive. In short, we show how functional areas play a role in the organization of AC and that firms may need an ambidextrous strategy to innovate effectively based on both upstream- and downstream-based AC.

Keywords: absorptive capacity, functional strategies, process innovation, product innovation, open innovation