姝 Academy of Management Review

2007, Vol. 32, No. 3, 774–786.

NOTE

ABSORPTIVE CAPACITY: VALUING A

RECONCEPTUALIZATION
GERGANA TODOROVA
Carnegie Mellon University

BORIS DURISIN
Bocconi University

Zahra and George (2002) suggested a reconceptualization of the absorptive capacity

construct in order to reduce ambiguity in empirical studies. A rereading of the seminal
Cohen and Levinthal (1990) article in light of current research on learning and inno-
vation directs our attention to serious ambiguities and omissions in Zahra and
George’s reconceptualization. We suggest a reintroduction of “recognizing the value,”
an alternative understanding of “transformation,” a clarification of “potential absorp-
tive capacity,” an elaboration of the impact of socialization mechanisms, an investi-
gation of the role of “power relationships,” and an inclusion of feedback loops in a
dynamic model of absorptive capacity.

Zahra and George’s (2002) reconceptualization
of absorptive capacity raises important issues
about the components, antecedents, contingen-
cies, and outcomes of the construct. Yet Zahra
and George do not sufficiently build on key in-
sights from Cohen and Levinthal’s (1989, 1990)
original conceptualization. Furthermore, Zahra
and George only partly integrate in their model
the substantial body of research on learning
and innovation accumulated since those semi-
nal articles (Cohen & Levinthal, 1989, 1990). We
critically examine Zahra and George’s contribu-
tion, make a call back to the Cohen and
Levinthal roots, and propose a refined model.
Cohen and Levinthal (1989, 1990) introduced
the term absorptive capacity to label the capa-
bilities of the firm to innovate and, thus, to be
dynamic. Absorptive capacity consists of the ca-
pabilities to recognize the value of new knowl-
edge, to assimilate it, and to apply it to commer-
cial ends. Absorptive capacity depends on the
knowledge source and prior knowledge, it is
conditioned on the appropriability regimes, and
it influences the innovative performance of the
firm. We suggest a summary of Cohen and
We thank Davide Ravasi, Paul Robertson, and the anon-
ymous AMR reviewers for their helpful comments. Boris
Durisin acknowledges the support from Bocconi University
(award #601506) and from SDA Bocconi.
774
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Levinthal’s theorizing on the components, ante-
cedents, contingencies, and outcomes of absorp-
tive capacity in Figure 1.
Zahra and George (2002) reviewed the litera-
ture on knowledge absorption and conceptual-
ized absorptive capacity as a dynamic capabil-
ity. This conceptualization, they argue, enables
them to provide a new model of the components,
antecedents, contingencies, and outcomes of ab-
sorptive capacity (see Figure 2). Comparing the
new model in Figure 2 with the original model in
Figure 1, we can distinguish what Zahra and
George have accomplished. The scholars substi-
tute the component “recognizing the value” with
“acquisition” and relocate the influence of the
regimes of appropriability. They add the con-
cepts of transformation, activation triggers, and
social integration mechanisms. They split ab-
sorptive capacity into “potential” absorptive ca-
pacity and “realized” absorptive capacity.
Zahra and George’s model is clearly rooted in
Cohen and Levinthal’s contribution, even
though they refer to it only three times and call
it merely one of “the most widely cited defini-
tions of ACAP [absorptive capacity]” (Zahra &
George, 2002: 186). In our opinion Zahra and
George do not build systematically enough on
Cohen and Levinthal’s original contribution.
Our renewed focus on the original model en-
ables us to address gaps and ambiguities in
2007 Todorova and Durisin 775

FIGURE 1
A Model of Absorptive Capacity Based on Cohen and Levinthal (1990)

Zahra and George’s theorizing and to generate
new ideas for future research.
We propose substantive changes to their
model, drawing on existing empirical research
(see Figure 3). First, we examine the components
of absorptive capacity in Zahra and George’s
model. We reintroduce recognizing the value,
the original first component in Cohen and
Levinthal’s (1990) conceptualization. Drawing on
learning theories, we argue that the new com-
ponent—namely, knowledge transformation—is
not the step after knowledge assimilation but
represents an alternative process linked to as-
similation by multiple paths. If we follow this
line of reasoning, the neat distinction between
the new constructs—namely, potential absorp-
tive capacity and realized absorptive capacity—
does not hold any more. We discuss alternative
approaches to the ratio of potential absorptive
capacity and realized absorptive capacity—
namely, the efficiency of absorptive capacity.
Second, we elaborate the theorizing on the
contingency factors. If we define absorptive ca-
pacity as a set of organizational routines, as
Zahra and George (2002) do, the contingency fac-
tor of social integration must influence not only
transformation but also the other components of
absorptive capacity. Furthermore, this contin-

FIGURE 2
A Model of Absorptive Capacity Based on Zahra and George (2002: 192)
776 Academy of Management Review
FIGURE 3
A Refined Model of Absorptive Capacity
gency factor may influence the absorptive ca-
pacity not only in positive ways, as proposed in
the Zahra and George model, but also in nega-
tive ways. We propose another contingency fac-
tor—power relationships—which influences
both the valuing and the exploitation of new
knowledge.
Third, to capture the dynamic aspects of the
phenomenon, we add new feedback links. Al-
though Zahra and George (2002) characterize ab-
sorptive capacity as a dynamic capability that
fosters organizational change and evolution,
they do not use thinking in cycles typical of
evolutionary approaches to management stud-
ies and, thus, fail to capture the dynamics and
complexity of the phenomenon.
These three groups of issues represent impor-
tant refinements of Zahra and George’s recon-
ceptualization, which strengthen theorizing on
absorptive capacity. The refined model of ab-
sorptive capacity builds systematically on Co-
hen and Levinthal’s (1990) seminal article, with a
more extensive literature review on innovation
and learning. Drawing on the resulting under-
standing of the process of knowledge absorp-
tion, we propose substantive changes in the con-
cepts and relationships in Zahra and George’s
(2002) model. Finally, our model redirects re-
July
search efforts and creates new avenues for fu-
ture research.
The remainder of the paper is structured in
four sections. In the first we discuss the redefin-
ing of components and the resulting changes in
relationships. We then modify contingent fac-
tors. To theorize on the dynamics, we add the
feedback loops in the third section. Finally, we
conclude that the proposed changes in the
model fill some important gaps, prevent misun-
derstandings of Zahra and George’s reconceptu-
alization of absorptive capacity, and provide a
foundation for future research.
COMPONENTS OF ABSORPTIVE CAPACITY
Zahra and George (2002) build on research
that uses absorptive capacity to explain organi-
zational phenomena. They distinguish four com-
ponents of absorptive capacity and combine
them into two subsets with different value-
creating potentials. We notice the necessity to
complement and enhance their reconceptualiza-
tion based on our reading of the original article
by Cohen and Levinthal (1990), as well as an
alternative review of subsequent research on
the absorption of knowledge from sources exter-
nal to the firm. We conceptualize that firms rec-
2007 Todorova and Durisin
ognize the value, acquire, transform or assimi-
late, and exploit knowledge. We reintroduce
recognizing the value, redefine transformation,
and elaborate on the concepts of potential ab-
sorptive capacity and realized absorptive ca-
pacity. These aspects are discussed below as
major avenues for future research on the topic.
Recognizing the Value
The first dimension of the original concept of
absorptive capacity is modified by Zahra and
George (2002). While Cohen and Levinthal (1990)
proposed recognizing the value of new external
knowledge, Zahra and George (2002) use the
term acquisition of new external knowledge. We
suggest the reintroduction of the original first
component of absorptive capacity, recognizing
the value, as a step before acquisition.
Cohen and Levinthal (1990) propose recogniz-
ing the value as the first component of absorp-
tive capacity. They discuss the features of the
cognitive structures of individuals and organi-
zations and provide evidence that, without prior
knowledge, organizations are not able to evalu-
ate the new information and, thus, fail to absorb
it. Related theorizing on the “attention-based”
view of the firm (Ocasio, 1997) emphasizes the
constraints on organizations in identifying new
external knowledge and the importance of rec-
ognizing and counteracting these constraints.
Research on learning and innovation provides
empirical evidence for the crucial role of recog-
nizing the value of new external knowledge for
the survival of firms in dynamic environments.
Henderson and Clark (1990) show that firms
have difficulty recognizing change in the archi-
tectural knowledge. In their empirical study of
the semiconductor photolithographic alignment
equipment industry, they illustrate how new ex-
ternal knowledge is screened out by information
filters and communication channels that em-
body obsolete architectural knowledge. In their
study of the automobile and mainframe com-
puter industries, Iansiti and Clark (1994) inves-
tigate how external and internal integration ca-
pabilities sample external information sources
and influence the communication between sub-
units. Cognitive and structural embeddedness
biases these capabilities in favor of incremental
learning and strong ties (Dacin, Ventresca, &
Beal, 1999; Granovetter, 1973, 1985; Hansen, 1999).
777
Firms often fail to identify and absorb valu-
able new external knowledge because they are
hampered by their embedded knowledge base,
rigid capabilities, and path-dependent manage-
rial cognition (Gavetti & Levinthal, 2000; Helfat,
2000; Langlois & Steinmueller, 2000; Leonard-
Barton, 1992; Tripsas & Gavetti, 2000). The capa-
bility to recognize the value of new external
knowledge represents an important component
of absorptive capacity because the valuing is
not automatic, it is biased, and it needs to be
fostered to allow the absorption to begin at all.
The constraints on the ability to judge the
potential of the new knowledge can stem not
only from the cognitive and capability bounds
on search and expectation formation but also
from the use of the values of key stakeholders as
evaluation criteria. Christensen and Bower
(1996) investigated the problems of managers in
properly assessing the value of new knowledge
when it is not relevant for the current demands
of key customers. The exploitation of new knowl-
edge did not seem to lead to an increase in the
value of the firm because it was assessed solely
on the basis of the criteria of the current custom-
ers, and managers did not invest in its absorp-
tion.
In sum, the ability to learn—that is, to absorb
external knowledge— depends to a great extent
on the ability to value the new external knowl-
edge. These aspects are vaguely implied if ac-
quisition remains as the first component of a
firm’s capability to absorb externally generated
knowledge (Zahra & George, 2002). Acquisition
as a first component mainly directs attention to
intensity, speed, and effort to gather knowledge.
The traps of not being able to motivate these
efforts by not “seeing” or “understanding” the
potential of the new external knowledge may be
overlooked. The importance of recognizing the
potential value of the new knowledge requires
that researchers and practitioners use this com-
ponent as a first building block of the dynamic
capability of absorptive capacity.
Assimilation or Transformation
Zahra and George (2002) propose transforma-
tion as the new component of absorptive capac-
ity. In their model transformation follows the
assimilation component. By means of transfor-
mation processes, organizations can understand
situations and ideas, which are initially per-
778 Academy of Management Review
ceived as incompatible with the current cogni-
tive frames of reference through a process of
bisociation (Koestler, 1966). Transformation ca-
pabilities “through the process of bisociation
help firms to develop new perceptual schema or
changes to existing processes” (Zahra & George,
2002: 195). This new capability explains why and
how organizations are capable of changing
their cognitive schemas to absorb new knowl-
edge that is less compatible with their prior
knowledge. Thus, Zahra and George (2002) use
research on cognition and cognitive schemas to
define the new component. Drawing on the
same research stream, we suggest that transfor-
mation is regarded not as a consequence but as
an alternative process to assimilation. More-
over, we propose considering the full complexity
of the relationships between assimilation and
transformation.
Cognitive science on individual learning dis-
cusses how development of new cognitive struc-
tures follows two alternative processes: assimi-
lation and transformation (Marshall, 1995;
Piaget, 1952). Piaget (1952) made the seminal
contribution to understanding learning pro-
cesses, which still dominates this branch of cog-
nitive theory and research on learning. In his
work assimilation and accommodation through
transformation are the alternative operative
principles of learning that apply according to
the type of external knowledge. Both learning
processes involve some degree of change of the
new knowledge and its combination with the
existing knowledge.
What happens to the existing cognitive struc-
tures distinguishes assimilation from transfor-
mation. When the new idea fits the existing cog-
nitive schemas well, the new idea is only
slightly altered to improve the fit and then in-
corporated into the existing cognitive structures.
The existing cognitive structure does not
change, and the knowledge is “assimilated.” Ac-
commodation through transformation as an al-
ternative process to assimilation occurs in the
case where new situations or ideas cannot real-
istically be altered to fit the existing knowledge
structures. New knowledge cannot be assimi-
lated. In this case the cognitive structures of the
individuals themselves must be transformed to
adapt to an idea or a situation that they cannot
assimilate. Research in cognitive psychology
and learning regards transformation not as a
July
process that follows assimilation but as an al-
ternative to it (see Gleitman, 1995).
As Zahra and George (2002) explain, the as-
similation component refers to knowledge that
an organization can interpret and comprehend
with the existing cognitive structures, because it
is within the firm’s search zone and compatible
within the existing context, and it involves com-
plementary assets close to its prior knowledge.
Introducing the new concept of transformation,
Zahra and George (2002) emphasize the need for
reframing and change of the existing knowl-
edge structures during this process.
How firms are able to change their knowledge
structures and reframe has been the topic of
interesting research contributions on change of
cognitive schemes, change of frames, and learn-
ing routines (e.g., Balogun & Johnson, 2004; Bar-
tunek, 1984; Hodgkinson & Bown, 1999; Labianca,
Gray, & Brass, 2000; Ranson, Hinings, & Green-
wood, 1980; Zollo & Winter, 2002). The transfor-
mation enables organizations to perceive new
knowledge to some extent incompatible with
prior knowledge, to build new cognitive struc-
tures, and to cope with path dependency. Thus,
it may be the transformation capability that al-
lows firm to survive a competence-destroying
change (Tushman & Anderson, 1986). Zahra and
George (2002) suggest that firms transform al-
ready-assimilated knowledge. We propose that
firms transform their knowledge structures
when knowledge cannot be assimilated. Trans-
formation represents an alternative process to
assimilation.
While Cohen and Levinthal (1990) discuss the
change of level of analysis when they move
from individual to organizational absorptive ca-
pacity, Zahra and George (2002) do not consider
the issue when they introduce the new compo-
nent of absorptive capacity—that is, transforma-
tion. Drawing on research on organizational
learning and innovation, we acknowledge that
organizational-level processes may be far more
complex than individual-level learning (Cohen
& Levinthal, 1990; Crossan, Lane, & White, 1999;
Glynn, Lant, & Milliken, 1994; Walsh & Ungson,
1991). Therefore, we propose more complex rela-
tionships between the processes of transforma-
tion and assimilation in organizations.1
1
We thank an anonymous reviewer for this suggestion.
2007 Todorova and Durisin
Research on innovation provides evidence of
the wide variety of types of new knowledge a
firm may encounter in its learning processes
(e.g., Gatignon, Tushman, Smith, & Anderson,
2002). Firms often fail to clearly distinguish be-
tween knowledge pieces that can successfully
be altered to fit the prior knowledge structures
from knowledge pieces that require the change
of the organizational knowledge structures
themselves. For example, managers in the ana-
log camera industry failed to understand
changes in the industry initially because they
repetitively tried to assimilate this knowledge
through their old cognitive models instead of by
transforming their cognitive structures (Tripsas
& Gavetti, 2000). Only after a series of failed
assimilation processes did they move to trans-
formation processes and change their cognitive
structures.
Knowledge pieces may move not only from
assimilation to transformation processes but
also in the opposite direction. For example, dur-
ing change of the knowledge structures through
new process implementation, organizations
may repeatedly regress to learning through
their prior knowledge structures and assimila-
tion processes after the transformation process
(Maritan & Brush, 2003). We propose that pieces
of knowledge that an organization tries to ab-
sorb may move backward and forward between
assimilation and transformation processes be-
fore they are successfully incorporated into the
organizational knowledge structures and ready
for exploitation.
Value Creation: The Potential and the Realized
Zahra and George (2002) introduce and distin-
guish the potential absorptive capacity that ac-
quires and assimilates new external knowledge
from the realized absorptive capacity that trans-
forms and exploits the new external knowledge.
Each of the new constructs is a subset of two
components. In our view the new constructs are
ambiguous. If assimilation and transformation
are alternative, not subsequent, components,
and if transformation becomes part of potential
absorptive capacity, then realized absorptive
capacity simply relabels the component of ex-
ploitation.
The definition problem of the new constructs
is not limited to the components that build each
of the subsets. The term potential absorptive
779
capacity seems to not fit the understanding of
absorptive capacity as “a set of organizational
routines and processes” explicitly proposed by
Zahra and George (2002: 186; emphasis added).
“Potential” might refer to the new knowledge
that enters the organization and is not yet as-
similated or transformed, rather than to the ca-
pacity to absorb new knowledge, which is an
organizational process.
If substituting potential absorptive capacity
with recognizing the value, acquisition, or as-
similation/transformation in all propositions on
antecedents and contingencies where potential
absorptive capacity is used, and realized ab-
sorptive capacity with exploitation in all propo-
sitions where realized absorptive capacity is
used, we observe no change in the meaning of
the propositions or in their implications. Some
implications may even be lost from not differen-
tiating among recognizing the value, acquisi-
tion, assimilation, transformation, and exploita-
tion.
In a study of potential and realized absorptive
capacity, Jansen, Van den Bosch, and Volberda
(2005) show that acquisition, assimilation, trans-
formation, and exploitation represent four em-
pirically distinct dimensions of absorptive
capacity. Confirmatory factor analysis demon-
strates that a four-factor model in which acqui-
sition, assimilation, transformation, and exploi-
tation are separate dimensions is clearly
superior to a two-factor model in which acquisi-
tion and assimilation are combined into a po-
tential absorptive capacity factor and transfor-
mation and exploitation are combined into
realized absorptive capacity factor. Conse-
quently, Jansen et al. (2005) test four separate
models instead of two and provide evidence of
the distinct effects of organizational anteced-
ents on the four distinct components of absorp-
tive capacity. Thus, researchers choose models
that do not combine the four components of ab-
sorptive capacity into two dimensions in order
to use variables with high construct validity in
their hypothesis testing.
Zahra and George (2002) argue that each of the
two new constructs has its unique role in value
creation and the outcome part of the model. Con-
sequently, they assert that the new conceptual-
ization of two subsets of absorptive capacity is
important. However, the discussion and the
propositions on potential and realized absorp-
tive capacity seem to separate and isolate cause
780 Academy of Management Review
and effect in two different sets of “unique
roles”—that is, causes— each with its own ef-
fect. Zahra and George (2002) propose that po-
tential capacity helps reconfigure the resource
base and deploys capabilities. They argue that
it influences competitive advantage through
flexibility of resources and capabilities. They
then propose that realized capacity influences
competitive advantage through the develop-
ment of new products or processes. Flexibility in
resource deployment, achieved because of po-
tential capacity, requires developing a new
product/process or entering a new market to
achieve competitive advantage. Without the ef-
fective functioning of realized capacity, poten-
tial capacity cannot have any effect on a firm’s
competitive advantage. Thus, potential absorp-
tive capacity, defined and discussed as Zahra
and George (2002) have, cannot be meaningfully
separated from realized absorptive capacity in
empirical studies of value creation effects.
An interesting extension is the argument that
the balance among the component capacities of
absorptive capacity matters. Zahra and
George’s idea of the importance of a high-
efficiency factor, where realized absorptive ca-
pacity approaches potential absorptive capac-
ity, can be further elaborated in terms of the
importance of a balanced development of all
four component capabilities.2 For example,
firms can possess a strong capability to identify
new knowledge and a weaker exploitation ca-
pability, which causes them to fail to translate
new knowledge into new products and pro-
cesses (Baker, Miner, & Eesley, 2003).
To summarize, after a discussion of the com-
ponents of absorptive capacity, the definition of
potential and realized absorptive capacity re-
mains unclear. The problems with the clear dif-
ferentiation of the roles of the two subsets for
firms’ performance further shed doubts on the
appropriateness of the two new concepts. The
concept “efficiency of absorption of external
knowledge” remains important, and it needs an
empirically meaningful definition. For example,
the ratio of available and applied knowledge
after each component or phase can be measured
and used as an efficiency factor for knowledge
absorption. Alternatively, the ratio of the knowl-
edge that enters the boundaries of the organiza-
2
We thank an anonymous reviewer for the suggestion.
July
tion and the knowledge embodied in successful
new processes or products can be analyzed. No
new constructs of potential or realized absorp-
tive capacity need to be introduced to investi-
gate either the efficiency ratio or the balance of
the four component capabilities.
CONTINGENT FACTORS
Zahra and George (2002) argue that the con-
tingent conditions under which absorptive ca-
pacity leads to competitive advantage have
been overlooked in previous research. They
identify activation triggers, social integration
mechanisms, and appropriability regimes as
the key contingencies. In this section we pro-
pose changes in the Zahra and George (2002)
model of absorptive capacity with regard to the
role and impact of two of these contingent fac-
tors—namely, social integration mechanisms
and appropriability regimes. Furthermore, we
propose incorporating a new contingent factor—
power relationships. We argue that these exten-
sions will enhance the understanding of the
functioning of absorptive capacity.
Social Integration Mechanisms
Zahra and George (2002) propose that the use
of social integration mechanisms lowers the
barriers between assimilation and transforma-
tion and, thus, increases absorptive capacity.
We argue that this is only part of the story. The
moderating influence of social integration is
likely to affect all components of absorptive ca-
pacity and to have either a positive or a nega-
tive effect, depending on specific contingencies.
Therefore, we propose a change in Zahra and
George’s (2002) model.
Zahra and George (2002) define absorptive ca-
pacity as a dynamic capability that consists of a
set of organizational routines and processes.
Routines and capabilities are the organizational
processes that make skills and resources work
together (Amit & Shoemaker, 1993; Dierickx &
Cool, 1989; Grant, 1991, 1996; Prahalad & Hamel,
1990). Organizational processes consist of social
interactions. Each component of absorptive ca-
pacity, if conceptualized as a set of social inter-
actions as Zahra and George (2002) do, is likely
to be influenced by social integration mecha-
nisms.
2007 Todorova and Durisin
Social integration mechanisms influence the
social interactions and, thus, the knowledge
processes that take place among organizational
members (Boland & Tenkasi, 1995; Brown & Du-
guid, 1991; Garvin, 1993; Hansen, 2002; Nonaka,
1994; von Krogh, Ichijo, & Nonaka, 2000; Weick,
1979) and among organizations (Dyer & Singh,
1998; Kogut, 2000; Koka & Prescott, 2002; Uzzi,
1997; Walker, Kogut, & Shan, 1997; Yli-Renko,
Autio, & Sapienza, 2001). For example, a study of
social networks in organizations revealed that
learned social relationships inside organiza-
tions influence knowledge-seeking behaviors
(Borgatti & Cross, 2003). Fostering extensive so-
cial networks helped firms in the pharmaceuti-
cal industry identify relevant external knowl-
edge and adapt successfully (Henderson, 1994).
Tripsas (1997) provides evidence that firms with
prior social relationships that allowed the effec-
tive identification of new external knowledge
outperformed others during periods of compe-
tence-destroying change. Consequently, not
only the assimilation of knowledge, as proposed
by Zahra and George (2002), but also the other
components of absorptive capacity, such as the
ability to identify new external knowledge, re-
quires investments in social networks and so-
cial integration initiatives.
Social integration mechanisms, which build
connectedness and shared meanings, influence
all processes of knowledge absorption. We pro-
pose that they influence the different processes
in different ways. According to the weak-tie the-
ory (Granovetter, 1973), distant and infrequent
relationships (i.e., weak ties) are efficient for
sharing new knowledge because they provide
access to novel information by linking otherwise
disconnected individuals and groups. Thus,
weak ties can positively influence absorption of
new knowledge. This consideration contradicts
the Zahra and George (2002) argument that only
strong ties positively influence absorptive ca-
pacity.
Hansen (1999) further develops theorizing on
weak ties and strong ties, finding that both
weak and strong ties can be beneficial for or-
ganizational knowledge processes depending
on two contingencies: the type of knowledge
process and the degree of knowledge complex-
ity. Strong ties and use of social integration
mechanisms will be accentuated when knowl-
edge is complex and also by knowledge trans-
fer. Yet strong ties may constrain the inflow of
781
new knowledge by handicapping the search
process. In the case of search processes, as well
as in the case of simple knowledge, weak ties
are more effective and social integration has a
negative moderating effect on the relationship
between absorptive capacity and innovation
outcomes.
These contributions both conceptually and
empirically contradict Zahra and George’s (2002)
propositions. We argue that social integration
mechanisms influence all components of ab-
sorptive capacity and that the influence can be
either negative or positive according to the type
of new knowledge and the type of knowledge
processes.
Regimes of Appropriability
In Zahra and George’s (2002) contribution, ap-
propriability regimes moderate the relationship
between absorptive capacity and its outcome of
sustainable competitive advantage. In markets
characterized by low efficacy of intellectual
property rights and ease of replication, firms
may fail to appropriate the returns to their inno-
vation, and the returns are likely to accrue to the
owners of complementary assets (Teece, 1986).
Thus, firms in markets with weak appropriabil-
ity regimes have lower returns to the knowledge
absorbed. In contrast, Cohen and Levinthal
(1990) suggest that appropriability regimes de-
termine the incentives to invest in absorptive
capacity. Thus, they conceptualize appropriabil-
ity regimes as a moderator of the antecedent of
absorptive capacity. Cohen and Levinthal’s
(1990) empirical study reveals that the effect of
appropriability on absorptive capacity is nega-
tive and implies that absorptive capacity in-
creases with weak regime and competitive spill-
overs. It is not clear whether the positive effects
of a strong appropriability regime in terms of
sustaining a competitive advantage, as pro-
posed by Zahra and George (2002), can be stron-
ger than the negative effects of a strong regime
in terms of competitive spillovers, as identified
by Cohen and Levinthal (1989, 1990). Therefore,
both effects of appropriability regimes must be
investigated to understand the mechanisms of
absorptive capacity.
A clearer understanding of the influence of
appropriability regimes on absorptive capacity
is needed. We suggest that researchers investi-
gate the moderating effect of the appropriability
782 Academy of Management Review
regime both on the relationship between ab-
sorptive capacity and its consequence—namely,
the ability to sustain competitive advantage—
and on the relationship between absorptive ca-
pacity and its antecedent—namely, the knowl-
edge sources.
Power Relationships
We point out an important gap in both Zahra
and George’s (2002) and Cohen and Levinthal’s
(1990) models of absorptive capacity. Drawing
on research on innovation and learning, we add
to the model the concept of power relationships,
which interact with cognitive processes, learn-
ing, and capabilities in the organization (Cohen
et al., 1996; Contu & Willmott, 2003; Dosi,
Levinthal, & Marengo, 2003). We consider power
relationships in order to improve our under-
standing of why only some of the available new
knowledge is used by the organization and why
some organizations are better able to exploit
external knowledge (Coopey & Burgoyne, 2000;
Hill & Rothaermel, 2003; Lawrence, Mauws,
Dyck, & Kleysen, 2005). We discuss the rationale
for the influence of the power relationships on
the absorption of new knowledge and propose a
moderating effect of the construct on the valuing
and exploitation of new knowledge.
Powerful actors within and outside the orga-
nization may influence knowledge absorption
processes to achieve their goals. Power relation-
ships have been defined as those relationships
that involve the use of power and other re-
sources by an actor to obtain his or her preferred
outcomes (Pfeffer, 1981). In our model we pro-
pose that the power relationship construct con-
sists of both the power relationships inside the
organization and the power relationships with
customers and other external stakeholders.
Power relationships inside the organization
influence the exploitation of new knowledge via
resource allocation processes (Bower, 1970;
Burgelman, 1983; Noda & Bower, 1996). For exam-
ple, Dougherty and Hardy (1996) explored sus-
tained product innovation in fifteen firms. They
revealed that the inability to connect new prod-
ucts with organizational resources resulting
from rigidity of power structures leads to prob-
lems with innovation. They suggested that the
systems of power inside an organization should
be reconfigured in order to enable a resource
allocation appropriate for the development of
July
new products. Intraorganizational power rela-
tionships can enable or inhibit the exploitation
of new knowledge. Thus, we propose that inter-
nal power relationships moderate the impact of
transformation or assimilation on new knowl-
edge exploitation.
The relationships of the firm with its custom-
ers represent another type of power relationship
that influences the absorption of new knowl-
edge (Danneels, 2003; Hill & Rothaermel, 2003;
Slater & Narver, 1998). Day (1999) warned against
firms becoming “customer compelled.” Directing
resource allocation processes and new product
development projects toward current customers
can cause failure to notice and apply knowledge
about new emerging technologies or new cus-
tomer segments. Despite the existence of new
ideas, knowledge, and technological skills, the
power of the current customer base can lead
firms to fail to exploit new knowledge (Chris-
tensen & Bower, 1996). In addition to commit-
ments to current customers, commitments to cur-
rent suppliers, alliance partners, and other
external stakeholders hinder the correct valuing
and exploitation of new knowledge (see Hill &
Rothaermel, 2003). Therefore, we propose that
external power relationships have a moderating
effect on the relationship between absorptive
capacity and competitive advantage.
In sum, we suggest that power relationships
can have an influence on absorptive capacity.
Argote, McEvily, and Reagans (2003) emphasize
the importance of future research on the influ-
ence of power and conflict on knowledge pro-
cesses. Another interesting point for future re-
search is the link between internal power
relationships and social integration mecha-
nisms. Although the addition of power as a new
contingent variable increases the complexity of
the model, we have the theoretical rationale and
empirical evidence that it can contribute consid-
erably to the explanation of absorption success
or failure.
A DYNAMIC MODEL OF ABSORPTIVE
CAPACITY
We suggest that a model of absorptive capac-
ity should capture the dynamics of absorptive
capacity through the addition of feedback loops.
The development of absorptive capacity is a
path-dependent process, and the increase of
knowledge in an area of expertise at any point
2007 Todorova and Durisin
in time fosters the future development of capa-
bilities in this and related areas (Cohen &
Levinthal, 1989, 1990; Raff, 2000; Yeoh & Roth,
1999). The use of tools and insights from theories
on system dynamics, which address exactly this
type of phenomenon, strengthens the modeling
of knowledge absorption in organizations.
Both Cohen and Levinthal’s (1990) conceptual-
ization and Zahra and George’s (2002) reconcep-
tualization emphasize the path dependency of
absorptive capacity: “By having already devel-
oped some absorptive capacity in a particular
area, a firm may more readily accumulate what
additional knowledge it needs in the subse-
quent periods in order to exploit any critical
external knowledge that may become avail-
able” (Cohen & Levinthal, 1990: 136). Future ab-
sorptive capacity is determined by the current
absorption of new knowledge in organizational
routines and processes. There is feedback. We
use the causal loop diagramming method intro-
duced in organizational theorizing to study sys-
tem dynamics (Repenning, 2002; Repenning &
Sterman, 2002; Stacey, 1995; Sterman, 2001).
Lacking this more complex view of causality, the
analytical models of absorptive capacity (Cohen
& Levinthal, 1990; Zahra & George, 2002) do not
correspond to their descriptive ideas of how ab-
sorptive capacity functions.
Recognition of the feedback relationships not
only allows us to better capture the theoretical
arguments on the dynamics of the system but
also has implications for the choice of research
methodologies (Farjoun, 2002; Stacey, 1995; Ster-
man, 2001). The study of a dynamic model of
absorptive capacity requires the use of longitu-
dinal research methods and process models,
which allow us to investigate the pace and path
of change (Barnett & Burgelman, 1996). Based on
our theoretical and methodological consider-
ations, we incorporate in the model positive
feedback loops between the absorbed new ex-
ternal knowledge and the antecedent of absorp-
tive capacity—prior organizational knowledge.
CONCLUSIONS
Processes ensuring integration and learning
are central to the dynamic capabilities of the
firm (Eisenhardt & Martin, 2000; Iansiti & Clark,
1994; Kogut & Zander, 1992; Teece, Pisano, &
Shuen, 1997; Winter, 2003). Absorptive capacity
allows the firm to change to match the dynamics
783
of the market (Cohen & Levinthal, 1989, 1990;
Zahra & George, 2002). Ongoing investment in
absorptive capacity, operationalized as R&D ex-
penditures, leads to persistent performance dif-
ferences and explains performance differences
in firms, even after a period of major market
discontinuity (Helfat, 1994; Rothaermel & Hill,
2005).
Lane, Koka, and Pathak (2006) have reviewed
research on strategy and organizations and con-
cluded that the little attention paid to the con-
ceptualization of absorptive capacity has stag-
nated the development of the field. On the basis
of a review of the literature and the reconceptu-
alization of absorptive capacity as a dynamic
capability, Zahra and George (2002) have at-
tempted to contribute to a better understanding
of the construct of absorptive capacity. However,
they omit some insights from the original con-
cept of absorptive capacity (Cohen & Levinthal,
1989, 1990). Moreover, they do not incorporate
some important research contributions on learn-
ing and innovation. Researchers who use the
Zahra and George model and do not reintegrate
Cohen and Levinthal’s (1989, 1990) conceptual-
ization and related research may miss out on
knowledge already existing in the scientific
community. We have critically examined the
proposed reconceptualization and extension of
the construct and diligently valued the potential
of the new knowledge before absorbing it. Thus,
we have attempted to contribute to better ab-
sorptive capacity in our scientific community.
This research note not only introduces modi-
fications in the propositions to be tested but also
indicates changes to the future research ave-
nues recommended by Zahra and George (2002).
In their recommendations they suggest that
there is a need to capture the individual capa-
bilities that constitute absorptive capacity. We
argue that our further clarification of the defini-
tion and theoretical rationale of each compo-
nent will enhance the operationalization of the
respective individual capabilities. This will al-
low researchers to develop measures of absorp-
tive capacity that capture the construct in its
entirety. We encourage research on transforma-
tion of knowledge structures during absorption
and suggest that the drivers of transformation
might differ from the drivers of assimilation. The
suggestion directs the attention of researchers
to the antecedents of absorptive capacity— both
their relative importance and the exploration of
784 Academy of Management Review
new antecedents. Furthermore, we propose that
researchers investigate more complex mecha-
nisms of relationships between transformation
and assimilation that consider the multilevel
aspects and high complexity of organizational
learning.
Zahra and George (2002) also contend that
temporal aspects of capability development
need to be recognized in future research. Based
on our dynamic model, researchers may be bet-
ter guided in examining the temporal aspects of
capability development and the evolution of
their research strategies. Moreover, they can use
from the outset the methods we discussed as
appropriate for these issues in the previous sec-
tion. In another avenue of research, Zahra and
George (2002) highlight the need to examine the
contingent conditions under which absorptive
capacity creates value. Nevertheless, they over-
look links between the contingent factors and
absorptive capacity, neglect directions of influ-
ence, and omit a contingent factor. Future re-
search should integrate those aspects into the
research design.
As a further suggestion to researchers, Zahra
and George (2002) offer the idea of relating po-
tential capacity and realized capacity to multi-
ple outcomes. Relating potential capacity and
realized capacity to multiple outcomes does not
allow researchers to investigate an efficiency
ratio. Moreover, we question the soundness of
their conceptualization of the two new capabil-
ities and propose studying the balance in the
development of all four capabilities of knowl-
edge absorption.
Zahra and George conclude that “it is prudent
to redefine and refocus” (2002: 200) research ten
years after the introduction of the concept of
absorptive capacity by Cohen and Levinthal
(1990). Recognizing the value of a reconceptual-
ization, researchers need to be prudent in their
redefining and refocusing. We believe our re-
search note strengthens this endeavor.
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Gergana Todorova (gtodorov@andrew.cmu.edu) is a Ph.D. student in organizational

behavior at Carnegie Mellon University. She received an MBA from the Unversity St.
Gallen, Switzerland, and a doctoral degree in strategy from Bocconi University, Italy.
Her research interests focus on the processes of innovation and learning on multiple
levels of analysis.

Boris Durisin (boris.durisin@sdabocconi.it) is an assistant professor at Bocconi Uni-

versity and a faculty member at SDA Bocconi School of Management. He received his
Ph.D. in management from the University St. Gallen, Switzerland. He studies market
innovation, firm innovativeness, and knowledge modularity.