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Absorptive capacity in New Zealand firms: Measurement and importance

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  • Richard Harris
  • Trinh Le

Abstract

To the best of our knowledge, this paper reports the first set of nationally representative results on the importance of ‘absorptive capacity’ (generally defined as a firm’s ability to internalise external knowledge) for firms. Using data principally from the Business Operations Survey 2005–15, we measure absorptive capacity in New Zealand (NZ) firms across a 10-year period and investigate if it remains stable in the long term. This is followed by considering how firms’ characteristics vary across levels of absorptive capacity and most importantly whether such capacity determines firms’ productivity performance across the primary, manufacturing and service sectors. Our results show that relative to other influences, absorptive capacity as measured here—net of the impact of, for example, foreign-ownership and human capital—has a substantial influence on exporting, innovation and undertaking R&D, and thus consequently firm-level productivity. Set against relatively poor productivity performance, the paper concludes with a discussion of how government should consider helping firms to boost their levels of absorptive capacity in NZ.

Suggested Citation

  • Richard Harris & Trinh Le, 2019. "Absorptive capacity in New Zealand firms: Measurement and importance," Science and Public Policy, Oxford University Press, vol. 46(2), pages 290-309.
  • Handle: RePEc:oup:scippl:v:46:y:2019:i:2:p:290-309.
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    File URL: http://hdl.handle.net/10.1093/scipol/scy058
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    Cited by:

    1. Paul Conway, 2018. "Can the Kiwi Fly? Achieving Productivity Lift-off in New Zealand," International Productivity Monitor, Centre for the Study of Living Standards, vol. 34, pages 40-63, Spring.
    2. Rho, Yeirae & Fabrizi, Simona & Lippert, Steffen, 2021. "Employee characteristics, absorptive capacity and innovation," MPRA Paper 106407, University Library of Munich, Germany, revised 04 Mar 2021.
    3. Richard Harris & Astrid Krenz & John Moffat, 2021. "The Effects of Absorptive Capacity on Innovation Performance: A Cross‐country Perspective," Journal of Common Market Studies, Wiley Blackwell, vol. 59(3), pages 589-607, May.

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    More about this item

    Keywords

    exports; R&D; innovation; absorptive capacity;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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