How Absorptive Capacity is Formed in a Latecomer Economy: Different Roles of Foreign Patent and Know-how Licensing in Korea

Moon Young Chung and Keun Lee ()

World Development, 2015, vol. 66, issue C, 678-694

Abstract: Different from previous studies that tend to use in-house research and development (R&D) as a proxy for absorptive capacity but fail to reveal the origins of this R&D ability, this paper attempts to determine the origin of absorptive capacity (AC) after defining such concept as the capability of a firm to conduct in-house R&D and to generate innovation outcomes. This paper distinguishes three forms of foreign technology acquisitions based on unique data from Korea, namely, know-how-only licensing, know-how-and-patent licensing, and patent-only licensing. An econometric analysis demonstrates that a firm tends to involve know-how licensing before it starts in-house R&D, whereas patent licensing is not significantly related to conducting R&D. Therefore, a substitution effect is found between foreign patent licensing and conducting in-house R&D, which is in contrast to the inducing effect of know-how licensing for in-house R&D. It is also found that conducting in-house R&D, and know-how licensing by a firm, respectively, is significantly related to a generation of innovations or patent applications in next periods. This study shows that a learning process that involves foreign technology, especially tacit knowledge in the form of know-how, occurs before firms can conduct in-house R&D and innovations.

Keywords: absorptive capacity; tacit knowledge; licensing; foreign technology; Korea; in-house R&D (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:66:y:2015:i:c:p:678-694

DOI: 10.1016/j.worlddev.2014.09.010

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