Enhancing Absorptive Capacity

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Enhancing Absorptive Capacity Introduction The focus of my study on this concept of Absorptive Capacity is intended to develop a basic understanding of the concept of absorptive capacity as well as outline the key capabilities that a firm should focus on in order to enhance it. I will then recommend how this concept should be applied more effectively in my own company. A key factor in creating and maintaining a competitive advantage in nearly any industry is a firm’s ability to increase its productivity. Productivity improvements are a measure of efficiency, which is the result of experience that is developed through repetition of a process over time. This ability to improve efficiency through experience is a concept known as the learning curve. In every organization, from the enterprise level all the way down the individual employee, the ability to improve the learning rate is contributing factor of success or advancement. The primary contributing factor to increasing an individual or firm level learning rate is effective management and utilization of prior experience. This is the underlying theory in of the concept of absorptive capacity. Maintaining a competitive advantage or the ability to create a competitive advantage will help ensure the long term success of a firm. Creating a competitive advantage is impacted by the effectiveness of the company’s strategic decisions. Absorptive capacity is the ability of the firm to recognize the value of new technology and apply it. It follows that the higher a firm’s absorptive capacity, the more effective strategic decisions will be. Therefore, there should be a focused effort to find ways to improve absorptive capacity through effective strategic initiatives. In my professional experience I have yet to see the term ‘Absorptive Capacity’ used as the basis of a strategic initiative of the
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