Absorptive Capacity Definition

Absorptive capacity is the ability of a firm to absorb new knowledge and integrate it into their existing processes and structures. This concept is important in the context of innovation and growth, as it determines how quickly and effectively a company can adopt new ideas and technologies.

There are three main elements to absorptive capacity:

1) The ability to recognize the potential value of new information;

2) The ability to assimilate that information into existing knowledge structures; and

3) The ability to use that information to create new products, processes or services.

While all companies have some level of absorptive capacity, it varies greatly from one organization to another. Factors such as size, age, organizational structure, culture and prior experience can all impact a company’s ability to take in and make use of new knowledge.