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

Abiodun Egbetokun and Ivan Savin

No 2012-056, Jena Economic Research Papers from Friedrich-Schiller-University Jena

Abstract: Cooperation can benefit and hurt firms at the same time. An important question then is: when is it better to cooperate. And 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 (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. While the focus of this paper is limited to a static scenario, where the cognitive distance between cooperating firms is fixed and given exogenously, in Savin and Egbetokun (2012) we address the dynamic approach and provide more extensive simulation results.

Keywords: inter-firm cooperation; absorptive capacity; cognitive distance; innovation; knowledge spillovers (search for similar items in EconPapers)
JEL-codes: C63 D83 L14 O32 O33 (search for similar items in EconPapers)
Date: 2012-10-15
New Economics Papers: this item is included in nep-bec, nep-cse, nep-ino, nep-knm, nep-neu, nep-sbm and nep-tid
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Related works:
Chapter: Absorptive Capacity and Innovation: When Is It Better to Cooperate? (2015)
Journal Article: Absorptive capacity and innovation: when is it better to cooperate? (2014) Downloads
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