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Absorptive Capacity and Innovation: When Is It Better to Cooperate?

Abiodun Egbetokun and Ivan Savin

A chapter in The Evolution of Economic and Innovation Systems, 2015, pp 373-399 from Springer

Abstract: 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.

Keywords: Absorptive Capacity; Knowledge Spillover; Potential Partner; External Knowledge; Knowledge Stock (search for similar items in EconPapers)
Date: 2015
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Journal Article: Absorptive capacity and innovation: when is it better to cooperate? (2014) Downloads
Working Paper: Absorptive Capacity and Innovation: When Is It Better to Cooperate? (2012) Downloads
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DOI: 10.1007/978-3-319-13299-0_16

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