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Absorptive capacity in New Zealand firms: Measurement and importance

Author

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  • Richard Harris

    (Durham University Business School and New Zealand Productivity Commission)

  • Trinh Le

    (Motu Economic and Public Policy Research)

Abstract

To the best of our knowledge, this paper reports the first set of nationally representative results on the importance of ‘absorptive capacity’. Absorptive capacity is generally defined as a firm's ability to internalise external knowledge. Using data principally from the New Zealand Business Operations Survey, we measure absorptive capacity 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 has a substantial influence on exporting, innovation, and undertaking R&D. Set against relatively poor performance, the paper concludes with a discussion of how government should consider helping firms to boost their levels of absorptive capacity.

Suggested Citation

  • Richard Harris & Trinh Le, 2018. "Absorptive capacity in New Zealand firms: Measurement and importance," Working Papers 18_01, Motu Economic and Public Policy Research.
  • Handle: RePEc:mtu:wpaper:18_01
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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.
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    3. 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.

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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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