R&D/Returns Causality: Absorptive Capacity or Organizational IQ

  title={R&D/Returns Causality: Absorptive Capacity or Organizational IQ},
  author={Anne Marie Knott},
  journal={Management Science},
Absorptive capacity is the principle that assimilating new knowledge requires prior knowledge. The attendant prescription is to invest more in R&D to derive greater benefit from the R&D of others (spillovers). Empirical tests of R&D productivity typically find absorptive capacity (R&D*rival R&D) to be significant. This result poses a puzzle however: What can a firm conducting 50% of industry R&D learn from a set of firms each conducting 5%? Aren’t the laggard firms merely playing catch-up? Yet… CONTINUE READING

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