Future studies

While writing this introduction to this thesis and reading numerous studies on absorptive capacity, the author asked herself one question over and over again: What exactly is absorptive capacity, in the end of all? There is much absorptive capacity literature that refers to the concept without examining it (Lane et al., 2006). In an effort to understand the profound nature of the concept as well as its links to other concepts, some propositions regarding possible future research avenues are presented below.

What kind of knowledge is being absorbed?

The question presented by Volberda et al. (2010) should be taken into closer examination.

Cohen and Levinthal (1989) focus mainly on technological knowledge and see three sources for absorptive, i.e. learning, capacity: the company’s internal research and development, competitor research and development spillovers and external technological knowledge from outside the industry. Many scholars subscribe to Cohen and Levinthal’s view and refer to technological knowledge. How about absorptive capacity in non-research and development environments? How about absorption of knowledge that is associated with, e.g., the customer’s behavior or future trends among the young?

Jansen et al. (2005) call for absorptive capacity studies that address the role of knowledge attributes.

As tacit knowledge requires richer processing mechanisms (Subramanian and Venkatraman, 2001) than explicit knowledge, what is the case with self-transcending knowledge? Perhaps the answers could be found in the field of intuition, mindfulness and self-awareness. In order to recognise opportunities and self-transcending knowledge, individuals could enhance awareness though mindfulness practices. And in order to absorb and share this kind of knowledge, mindful connections and practices for creating those should be examined.

60 Table 12. Various stages of enhancing organisational absorptive capacity

Individual Organisational How to enhance

Hire different people; hire people who are odd, who question your way of thinking Foster the idea that anyone can bring new ideas to organisation

Create meeting places for ideas to collide Ask employees, not system providers, which tools they would use

Assimilation Analyse,

Give away power to make decisions on small improvements

Develop long-term evaluation for learning and innovativeness

6.3 Future studies

While writing this introduction to this thesis and reading numerous studies on absorptive capacity, the author asked herself one question over and over again: What exactly is absorptive capacity, in the end of all? There is much absorptive capacity literature that refers to the concept without examining it (Lane et al., 2006). In an effort to understand the profound nature of the concept as well as its links to other concepts, some propositions regarding possible future research avenues are presented below.

What kind of knowledge is being absorbed?

The question presented by Volberda et al. (2010) should be taken into closer examination.

Cohen and Levinthal (1989) focus mainly on technological knowledge and see three sources for absorptive, i.e. learning, capacity: the company’s internal research and development, competitor research and development spillovers and external technological knowledge from outside the industry. Many scholars subscribe to Cohen and Levinthal’s view and refer to technological knowledge. How about absorptive capacity in non-research and development environments? How about absorption of knowledge that is associated with, e.g., the customer’s behavior or future trends among the young?

Jansen et al. (2005) call for absorptive capacity studies that address the role of knowledge attributes.

As tacit knowledge requires richer processing mechanisms (Subramanian and Venkatraman, 2001) than explicit knowledge, what is the case with self-transcending knowledge? Perhaps the answers could be found in the field of intuition, mindfulness and self-awareness. In order to recognise opportunities and self-transcending knowledge, individuals could enhance awareness though mindfulness practices. And in order to absorb and share this kind of knowledge, mindful connections and practices for creating those should be examined.

61 In absorptive capacity studies, more attention should be awarded to the field of study and its influence on knowledge that is being absorbed. For example, Jansen et al. (2005) study financial services, and their data is from general managers. There are two points here: 1) the knowledge within the field of financial services and 2) the knowledge of the general managers. In examining the actual processes of absorption and exploitation, the employee level should be taken into consideration. General managers present one viewpoint to produce knowledge. How about the absorption of tacit, let alone self-transcending, dimensions of knowledge?

In terms of explicit knowledge, i.e. information, alternative representational practices should be acknowledged (Elkjaer, 2003; Gherardi, 2006; Pässilä and Oikarinen, forthcoming). When this is put into an organisational context, it is seldom simply knowledge or a new idea that needs to be executed. The new knowledge abounds with different meanings for various individuals and groups (Pässilä and Oikarinen, forthcoming). To one person, the idea or piece of knowledge may mean a promotion, while another assumes she will lose her job after implementation of that same idea. A third person feels that it facilitates his job, whereas a fourth person just knows that now he has to do something twice. A fifth person would like it if nothing changed. All these five individuals will react and act upon the knowledge or idea proposed according to their background and interests. We cannot simply transfer knowledge without taking a closer look at who is there to transfer it and what their incentives are. And even with content and incentives, nothing is transferred without action, i.e.

interaction.

How can absorptive capacity be researched using qualitative methods?

In order to answer the question of what happens in the process of knowledge absorption, more qualitative studies should be conducted. The bulk of absorptive capacity literature contains quantitative studies where the data from an organisation has been provided by a single individual.

They measure the outcomes of absorptive capacity, but from a process perspective, the myth of the concept of absorptive capacity remains.

More qualitative studies on absorptive capacity and its organisational antecedents should be conducted. What is absorptive capacity in individual processes and interactions? What is it that cannot be written down but can be sensed in situations? For example, knowledge itself may not be bad or not useful for an organisation; it may be the individuals within the organisation who do not know how to interact and create a mutual understanding.

Broker theories would offer fresh insight into absorptive capacity literature. What actually is taking place when knowledge is transferred? This thesis examined the concept of social capital. What about social intelligence or playfulness? Also, in-depth studies on management in environments that are good for leveraging absorptive capacity could be examined.

How can absorptive capacity be measured in practice-based Doing–Using–Interacting environments?

As noted in the work of Cohen and Levinthal (1989), the current measures of absorptive capacity usually comprise research and development expenses. Cohen and Levinthal (1989) argue that

“incentives to learn should influence research and development spending” (p. 570), which most likely has had a great influence in the determination of research and development expenses as measure for absorptive capacity. However, as Lane et al. (2006) conclude, the research stream focusing on empirical examples of the impact on research and development incentives on

61 In absorptive capacity studies, more attention should be awarded to the field of study and its influence on knowledge that is being absorbed. For example, Jansen et al. (2005) study financial services, and their data is from general managers. There are two points here: 1) the knowledge within the field of financial services and 2) the knowledge of the general managers. In examining the actual processes of absorption and exploitation, the employee level should be taken into consideration. General managers present one viewpoint to produce knowledge. How about the absorption of tacit, let alone self-transcending, dimensions of knowledge?

In terms of explicit knowledge, i.e. information, alternative representational practices should be acknowledged (Elkjaer, 2003; Gherardi, 2006; Pässilä and Oikarinen, forthcoming). When this is put into an organisational context, it is seldom simply knowledge or a new idea that needs to be executed. The new knowledge abounds with different meanings for various individuals and groups (Pässilä and Oikarinen, forthcoming). To one person, the idea or piece of knowledge may mean a promotion, while another assumes she will lose her job after implementation of that same idea. A third person feels that it facilitates his job, whereas a fourth person just knows that now he has to do something twice. A fifth person would like it if nothing changed. All these five individuals will react and act upon the knowledge or idea proposed according to their background and interests. We cannot simply transfer knowledge without taking a closer look at who is there to transfer it and what their incentives are. And even with content and incentives, nothing is transferred without action, i.e.

interaction.

How can absorptive capacity be researched using qualitative methods?

In order to answer the question of what happens in the process of knowledge absorption, more qualitative studies should be conducted. The bulk of absorptive capacity literature contains quantitative studies where the data from an organisation has been provided by a single individual.

They measure the outcomes of absorptive capacity, but from a process perspective, the myth of the concept of absorptive capacity remains.

More qualitative studies on absorptive capacity and its organisational antecedents should be conducted. What is absorptive capacity in individual processes and interactions? What is it that cannot be written down but can be sensed in situations? For example, knowledge itself may not be bad or not useful for an organisation; it may be the individuals within the organisation who do not know how to interact and create a mutual understanding.

Broker theories would offer fresh insight into absorptive capacity literature. What actually is taking place when knowledge is transferred? This thesis examined the concept of social capital. What about social intelligence or playfulness? Also, in-depth studies on management in environments that are good for leveraging absorptive capacity could be examined.

How can absorptive capacity be measured in practice-based Doing–Using–Interacting environments?

As noted in the work of Cohen and Levinthal (1989), the current measures of absorptive capacity usually comprise research and development expenses. Cohen and Levinthal (1989) argue that

“incentives to learn should influence research and development spending” (p. 570), which most likely has had a great influence in the determination of research and development expenses as measure for absorptive capacity. However, as Lane et al. (2006) conclude, the research stream focusing on empirical examples of the impact on research and development incentives on

62 absorptive capacity is questionable. The number of patents is used in the literature as both a dependent and an independent variable; Lane et al. (2006) question whether the research can be reliable if the same measure is used in both input and output. Research and development spending offers only a partial view of innovation (Jensen et al., 2007). Furthermore, the amount of external knowledge has also been used to measure absorptive capacity. A better measure would be, for example, the capacity to disseminate and apply acquired knowledge (Lane et al., 2001). Lane et al.

(2006) also question the use of Ricardian rents to evaluate absorptive capacity, such as how much difficult-to-imitate knowledge a firm possesses (e.g. Barney, 1991).

When Cohen and Levinthal (1994) talk about investments in absorptive capacity, they do not solely mean research and development expenses, although that was their initial proposition in a 1989 paper. They talk about first- and second-mover advantages and state that even if a firm thinks it is the only one that can exploit new technology, they have to invest in absorptive capacity. This entails also the acting upon the technology, not just developing it. So, what do research and development expenses really tell us? Cohen and Levinthal (1989) state that absorptive capacity is assumed to be generated when firms invest in research and development.

In examining the concept of absorptive capacity, Lane et al. (2006) claim that absorptive capacity studies should at least employ absorptive capacity as a capability. As a word, capability signifies potential absorptive capacity (Zahra and George, 2002). Webster’s dictionary (1996) confirms the concern: the word capability means “the state or quality of being capable” (p. 197). It says nothing about performance. In other words, we know that we could do it, but it is not stated whether we would actually do it. This fact can partially explain why scholars evaluate absorptive capacity with measures that actually describe potential, such as research and development expenses. Hence, in this examination the realisation of the potential should be acknowledged in studies of absorptive capacity.

Most absorptive capacity studies to date are quantitative. Perhaps a more profound examination of the nature of the phenomenon would facilitate the generation of new measures as well. A measurement model for absorptive capacity should be developed that follows the principles of Doing–Using–Interacting and Mode 2 knowledge generation. How about non-research and development innovations? As Jensen et al. (2007) note, great innovation potential lies in knowledge that is not technology-based. What is this Doing–Using–Interacting knowledge and how could the absorptive capacity in that be measured? “Doing–Using–Interacting mode relies on informal processes of learning and experience-based know-how” (Jensen et al., 2007, p. 680).

Absorptive capacity has been measured in the incremental sense through the speed of learning and frequency. Absorptive capacity in the context of radical innovation has not been examined to any great extent. What would be the measures for doing so, considering that an organisation’s absorptive capacity depends on its ability to share knowledge and communicate internally (Cohen and Levinthal, 1990)? Communication platforms, opportunities that are arranged for people with different backgrounds to meet each other? The group’s creative social capital? Its capacity for critical thinking and critical reflection?

How do different levels of absorptive capacity correlate?

Literature on the different levels of analysis in absorptive capacity exists regarding the regional (Uotila, et al., 2006), organisational (Cohen and Levinthal, 1990), unit (Jansen et al., 2005) and individual (Pedrosa et al., 2010) levels. However, the comparison and the relationships between these levels of analysis have to some degree been ignored. Research comparing regions and

62 absorptive capacity is questionable. The number of patents is used in the literature as both a dependent and an independent variable; Lane et al. (2006) question whether the research can be reliable if the same measure is used in both input and output. Research and development spending offers only a partial view of innovation (Jensen et al., 2007). Furthermore, the amount of external knowledge has also been used to measure absorptive capacity. A better measure would be, for example, the capacity to disseminate and apply acquired knowledge (Lane et al., 2001). Lane et al.

(2006) also question the use of Ricardian rents to evaluate absorptive capacity, such as how much difficult-to-imitate knowledge a firm possesses (e.g. Barney, 1991).

When Cohen and Levinthal (1994) talk about investments in absorptive capacity, they do not solely mean research and development expenses, although that was their initial proposition in a 1989 paper. They talk about first- and second-mover advantages and state that even if a firm thinks it is the only one that can exploit new technology, they have to invest in absorptive capacity. This entails also the acting upon the technology, not just developing it. So, what do research and development expenses really tell us? Cohen and Levinthal (1989) state that absorptive capacity is assumed to be generated when firms invest in research and development.

In examining the concept of absorptive capacity, Lane et al. (2006) claim that absorptive capacity studies should at least employ absorptive capacity as a capability. As a word, capability signifies potential absorptive capacity (Zahra and George, 2002). Webster’s dictionary (1996) confirms the concern: the word capability means “the state or quality of being capable” (p. 197). It says nothing about performance. In other words, we know that we could do it, but it is not stated whether we would actually do it. This fact can partially explain why scholars evaluate absorptive capacity with measures that actually describe potential, such as research and development expenses. Hence, in this examination the realisation of the potential should be acknowledged in studies of absorptive capacity.

Most absorptive capacity studies to date are quantitative. Perhaps a more profound examination of the nature of the phenomenon would facilitate the generation of new measures as well. A measurement model for absorptive capacity should be developed that follows the principles of Doing–Using–Interacting and Mode 2 knowledge generation. How about non-research and development innovations? As Jensen et al. (2007) note, great innovation potential lies in knowledge that is not technology-based. What is this Doing–Using–Interacting knowledge and how could the absorptive capacity in that be measured? “Doing–Using–Interacting mode relies on informal processes of learning and experience-based know-how” (Jensen et al., 2007, p. 680).

Absorptive capacity has been measured in the incremental sense through the speed of learning and frequency. Absorptive capacity in the context of radical innovation has not been examined to any great extent. What would be the measures for doing so, considering that an organisation’s absorptive capacity depends on its ability to share knowledge and communicate internally (Cohen and Levinthal, 1990)? Communication platforms, opportunities that are arranged for people with different backgrounds to meet each other? The group’s creative social capital? Its capacity for critical thinking and critical reflection?

How do different levels of absorptive capacity correlate?

Literature on the different levels of analysis in absorptive capacity exists regarding the regional (Uotila, et al., 2006), organisational (Cohen and Levinthal, 1990), unit (Jansen et al., 2005) and individual (Pedrosa et al., 2010) levels. However, the comparison and the relationships between these levels of analysis have to some degree been ignored. Research comparing regions and

63 organisations exists. This research avenue is also consistent with Volberda et al.’s (2010) suggestions for future research.

Yet deeper examination is needed. What kinds of regions favor interaction? What is the role of regional agencies in facilitating interaction, not just transferring information or technology signals?

How about the national level? Finns are good at research and development; how good are they at interaction?

What kinds of antecedents for absorptive capacity govern practice-based Doing–Using–

Interacting environments?

The focus of this thesis is on the mechanisms that enhance the transfer of absorptive capacity from the individual level to the organisational level. Of particular interest is the interplay between transformation and assimilation. How should resources be divided between effective routines and playful experimentation and exploration? What are the things that make organisations take big risks and pursue crazy ideas? What are the factors that affect absorptive capacity?

Reflection has been noted as an important part of creative learning (Nilsen and Ellström, 2012). At the individual level, reflection starts from self-awareness; from seeing oneself. The concept of presence (For example Senge et al. 2005) is also interesting in the context of absorptive capacity, and especially in transformation. People in possession of deeper presence see better opportunities.

Is this assumption correct? How does presence relate to prior knowledge? Opportunity recognition is also affected by the ability to see possible worlds. Only a free mind sees clearly. How could organisations use this in order to enhance absorptive capacity?

Play is a term related to exploration (March, 1991). Playfulness questions habitual beliefs and enables a shift in viewpoints, allowing the making of new distinctions (Barry and Meisiek, 2010).

Play is a term related to exploration (March, 1991). Playfulness questions habitual beliefs and enables a shift in viewpoints, allowing the making of new distinctions (Barry and Meisiek, 2010).