Absorptive Capacity- One size fits all? A Firm-level analysis of absorptive capacity for different kinds of knowledge. ZEW Discussion Paper No. 05-72 Tobias Schmidt Centre for European Economic Research (ZEW) Tel.: +49-621-1235-235, schmidt@zew.de Tobias Schmidt Ph.D. Student, Uni Jena, Cantner Zentrum für europäische Wirtschaftsforschung in Mannheim

Motivation Little research on the determinants and mechanisms that increase absorptive capacity Mahnke et al. 2005; Lane et al. 2002; Veugelers 1997 Problem to find good empirical measure of absorptive capacity Zahara and George, 2002; Becker and Peters 2000 Same absorptive capacity for all types of knowledge? High-tech much more innovative; knowledge-intensive industry more innovative IT => Mehr Wissen frei verfügbar und verarbeitbar Firmen managen Wissensflüsse: Kooperation um Zugang zu externem Wissen zu erhalten. Viel externes Wissen verfügbar => weniger Kooperationen Unvollständiger Schutz: Free-riding => Kooperationsneigung runter Schutz erhöhen in dem kooperiert Ergebnis: Modell mit Kooperation in Abhängigkeit von incoming spillovers and appropriability.

Definition of Absorptive Capacity AC: Firms’ ability to “identify, assimilate, and exploit knowledge from the environment” Cohen and Levinthal 1989, 1990 Concept is used at the individual-, organizational-, regional-, and national-level Narula 2004; Van den Bosch 2003 Used in economics and business administration Belderbos et al. 2004; Lenox and King 2004 High-tech much more innovative; knowledge-intensive industry more innovative IT => Mehr Wissen frei verfügbar und verarbeitbar Firmen managen Wissensflüsse: Kooperation um Zugang zu externem Wissen zu erhalten. Viel externes Wissen verfügbar => weniger Kooperationen Unvollständiger Schutz: Free-riding => Kooperationsneigung runter Schutz erhöhen in dem kooperiert Ergebnis: Modell mit Kooperation in Abhängigkeit von incoming spillovers and appropriability.

Determinants of Absorptive Capacity: R&D Activities R&D intensity and R&D budgets intensity: Cohen and Levinthal 1989; Stock et al. 2001; Rocha 1999; Cantner and Pyka 1998; budgets: Leahy and Neary 2004 ; Grünfeld 2003 Continuous R&D activities Oltra and Flor 2003; Becker and Peters 2000 R&D lab Becker and Peters 2000; Veugelers 1997 Literature has identified a number of other motives for cooperation besides knowledge: Knowledge: For the sake of completeness Financial constraint and risk: share the burden Absorptive capacity: Outside knowledge becomes mor usefull, interesting Complementarities: Things you can’t do on your own can be done by others. Size, industry, tech. distance: Size: The larger the more projects the more possibilities and needs to cooperate Industry: might be more open or closed in general, intensity of competition Techn. Distance: easier to profit if close Goal: Empirically investigate the influence of factors on the propensity to cooperate in innovation using German CIS III data

Determinants of Absorptive Capacity: Prior Related Knowledge/Skills Absorptive capacity is path dependent Cohen and Levinthal 1990 Employees’ level of education Rothwell and Dodgson 1991 Gatekeepers Gradwell 2003; Vinding 2000 Literature has identified a number of other motives for cooperation besides knowledge: Knowledge: For the sake of completeness Financial constraint and risk: share the burden Absorptive capacity: Outside knowledge becomes mor usefull, interesting Complementarities: Things you can’t do on your own can be done by others. Size, industry, tech. distance: Size: The larger the more projects the more possibilities and needs to cooperate Industry: might be more open or closed in general, intensity of competition Techn. Distance: easier to profit if close Goal: Empirically investigate the influence of factors on the propensity to cooperate in innovation using German CIS III data

Determinants of Absorptive Capacity: Organization and HRM Organizational structure Gradwell 2003; Welsch et al. 2001; Van den Bosch al. 1999; Lane and Lubatkin 1998 Human Resource and Knowledge Management Mahnke et al. 2005; Jones and Craven 2001; Vinding 2000; Cohen and Levinthal 1994 Involvement of managers Lenox and King 2004 Literature has identified a number of other motives for cooperation besides knowledge: Knowledge: For the sake of completeness Financial constraint and risk: share the burden Absorptive capacity: Outside knowledge becomes mor usefull, interesting Complementarities: Things you can’t do on your own can be done by others. Size, industry, tech. distance: Size: The larger the more projects the more possibilities and needs to cooperate Industry: might be more open or closed in general, intensity of competition Techn. Distance: easier to profit if close Goal: Empirically investigate the influence of factors on the propensity to cooperate in innovation using German CIS III data

Absorptive Capacity for Different Knowledge Learning depends on the similarity between “teacher” and “student” Lane and Lubatkin 1998 Prior experience and related knowledge Dussauge et al. 2000; Cohen and Levinthal 1990 Scientific knowledge Becker and Peters 2000; Nelson and Wolff 1997 Literature has identified a number of other motives for cooperation besides knowledge: Knowledge: For the sake of completeness Financial constraint and risk: share the burden Absorptive capacity: Outside knowledge becomes mor usefull, interesting Complementarities: Things you can’t do on your own can be done by others. Size, industry, tech. distance: Size: The larger the more projects the more possibilities and needs to cooperate Industry: might be more open or closed in general, intensity of competition Techn. Distance: easier to profit if close Goal: Empirically investigate the influence of factors on the propensity to cooperate in innovation using German CIS III data

Data: Mannheim Innovationpanel Survey of the innovation behavior of German firms conducted by the ZEW on behalf of the ministry for education and research (BMBF) Enterprises with 5 or more employees in Manufacturing (since 1993) Service Sector (since 1996) Mannheim Innovationpanel (MIP) 2003 Innovation activities during the period 2000 – 2002 Comparable to CIS III Responses from about 4,500 enterprises Responses from about 2,100 innovators

Empirical Model: Dependent Variables Three types of absorptive capacity (AC): AC for knowledge from own industry (NACE2) AC for knowledge from other industries (NACE2) AC for knowledge from universities or other public research institutes Construction: Question on contribution of external actors to innovations => Focus on “exploitation” component of AC.

Independent Variables: R&D and Skills R&D activities: Continuous R&D (dummy) R&D intensity, R&D intensity squared Prior related knowledge/Skills: Share of employees with higher education

Independent Variables: Organization and HRM Stimulation of innovation activities and knowledge sharing (index, factor analysis) Collaboration between departments on innovation projects (dummies): Informal contacts between employees Open communication of ideas and concepts Joint strategy development Mutual support with problems Meetings between heads of departments Temporary exchange of personnel Seminars and workshops involving several departments

Independent Variables: Control Variables Size (number of employees) Situated in East Germany (dummy) Industry groups (6 dummies): Other manufacturing (reference group) Low-tech industries Medium-low-tech industries Medium-high-tech industries High-tech industries Low-tech services High-tech services

1. Probit Estimation 2. Triprobit (GHK-Simulator)

Conclusion R&D and Skills plays an important role in determining AC Stimulation of innovation activities and knowledge sharing is important for AC Factors contribute differently to AC for different kinds of knowledge Intra-industry knowledge requires experience rather than R&D Further research on different types of AC necessary Proxies for AC should be chosen with respect to the knowledge to be acquired. Knowledge flows, especially outgoing Legal protection unique for Germany (system?) Different motives like we have just seen Intramural R&D budgets just one way to capture absorptive capacity Looks like decision is taken simultaneously

Absorptive Capacity- One size fits all? A Firm-level analysis of absorptive capacity for different kinds of knowledge. ZEW Discussion Paper No. 05-72 Tobias Schmidt Centre for European Economic Research (ZEW) Tel.: +49-621-1235-235, schmidt@zew.de Tobias Schmidt Ph.D. Student, Uni Jena, Cantner Zentrum für europäische Wirtschaftsforschung in Mannheim