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Absorptive capacity and innovation: when is it better to cooperate?

Abiodun Egbetokun and Ivan Savin

Journal of Evolutionary Economics, 2014, vol. 24, issue 2, 399-420

Abstract: Cooperation can benefit and hurt firms at the same time. An important question then is: when is it better to cooperate? And, once the decision to cooperate is made, how can an appropriate partner be selected? In this paper we present a model of inter-firm cooperation driven by cognitive distance, appropriability conditions and external knowledge. Absorptive capacity of firms develops as an outcome of the interaction between absorptive R&D and cognitive distance from voluntary and involuntary knowledge spillovers. Thus, we offer a revision of the original model by Cohen and Levinthal (Econ J 99(397):569–596, 1989), accounting for recent empirical findings and explicitly modeling absorptive capacity within the framework of interactive learning. We apply that to the analysis of firms’ cooperation and R&D investment preferences. The results show that cognitive distance and appropriability conditions between a firm and its cooperation partner have an ambiguous effect on the profit generated by the firm. Thus, a firm chooses to cooperate and selects a partner conditional on the investments in absorptive capacity it is willing to make to solve the understandability/novelty trade-off. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Inter-firm cooperation; Absorptive capacity; Cognitive distance; Innovation; Knowledge spillovers; C63; D83; L14; O32; O33 (search for similar items in EconPapers)
Date: 2014
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Chapter: Absorptive Capacity and Innovation: When Is It Better to Cooperate? (2015)
Working Paper: Absorptive Capacity and Innovation: When Is It Better to Cooperate? (2012) Downloads
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DOI: 10.1007/s00191-014-0344-x

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