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

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  • Abiodun Egbetokun

    ()
    (Graduate College "Economics of Innovative Change", Friedrich Schiller University Jena)

  • Ivan Savin

    ()
    (Graduate College "Economics of Innovative Change", 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.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2012-056.

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Date of creation: 15 Oct 2012
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Handle: RePEc:jrp:jrpwrp:2012-056

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Keywords: inter-firm cooperation; absorptive capacity; cognitive distance; innovation; knowledge spillovers;

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  1. Ron Boschma, 2005. "Proximity and Innovation: A Critical Assessment," Regional Studies, Taylor & Francis Journals, vol. 39(1), pages 61-74.
  2. Wuyts, S.H.K. & Colombo, M. & Dutta, S. & Nooteboom, B., 2005. "Empirical Tests of Optimal Cognitive Distance," Discussion Paper 2005-45, Tilburg University, Center for Economic Research.
  3. Blueschke, D. & Blueschke-Nikolaeva, V. & Savin, I., 2013. "New insights into optimal control of nonlinear dynamic econometric models: Application of a heuristic approach," Journal of Economic Dynamics and Control, Elsevier, vol. 37(4), pages 821-837.
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  14. Wiethaus, Lars, 2005. "Absorptive capacity and connectedness: Why competing firms also adopt identical R&D approaches," International Journal of Industrial Organization, Elsevier, vol. 23(5-6), pages 467-481, June.
  15. Baum, Joel & Cowan, Robin & Jonard, Nicolas, 2009. "Network-independent partner selection and the evolution of innovation networks," MERIT Working Papers 022, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  16. Flatten, Tessa C. & Engelen, Andreas & Zahra, Shaker A. & Brettel, Malte, 2011. "A measure of absorptive capacity: Scale development and validation," European Management Journal, Elsevier, vol. 29(2), pages 98-116, April.
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Cited by:
  1. Ivan Savin & Abiodun Egbetokun, 2013. "Emergence of Innovation Networks from R&D Cooperation with Endogenous Absorptive Capacity," Jena Economic Research Papers 2013-022, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  2. Ivan Savin & Dmitri Blueschke, 2013. "Solving nonlinear stochastic optimal control problems using evolutionary heuristic optimization," Jena Economic Research Papers 2013-051, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.

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