Absorptive capacity and innovation in China

Abstract

Purpose The purpose of this paper is to question the conventional wisdom that China fails to produce distinctive innovation; its capabilities limited merely to copying and reverse engineering. The author postulates that the lack of innovation is a delayed activity since China is undergoing a process of building absorptive capacity (AC) as a precursor to innovation. Design/methodology/approach The author probes this question by drawing on the concept of AC, a competence separate from innovativeness and a precursor to it. By drawing on the AC literature three propositions are established. Subsequently, these propositions are examined, in part, with data drawn from 34 interviews conducted in China with CEOs, other senior corporate officers and government officials. In this way, the author explores the challenges to innovating. Findings Thomson Reuters 2015 Top Global Innovators report listed no Chinese company among its top 100 list of innovative companies. The author’s belief, however, favors China to become a source of innovation. A positive tilt derived from both interviews and recent reports published by Bain & Company, Booz and Co as well as McKinsey & Co. This evidences, the author argues, China is acquiring AC, a competence independent of innovation but a necessary antecedent to decoding and deploying the intellectual property in its portfolio. The collective effect of this is that the perception of China as a source of innovative activity will show an uptick when the AC threshold is reached. Research limitations/implications This is a viewpoint paper grounded on an exploratory study. Practical implications Guidance on AC development is valuable to government policy makers promoting innovation in China and those attempting to arbitrage these developments. Similarly, policy makers in competitive nations should also be aware that their innovation-focused industries may need nurturing and bolstering since they may be at risk of being swept away by a tsunami-like innovation wave from China. Originality/value This is an original take on the relationship of AC and innovativeness in China. The author argues that in contrast to the conventional wisdom China has the potential for innovativeness.

Social capital and corporate entrepreneurship: the role of absorptive capacity in emerging markets

“…Absorptive capacity is commonly defined as the group of routines and processes that enable the acquisition, assimilation, transformation and exploitation of knowledge needed for the creation of organizational dynamic capabilities (Von Briel et al, 2019;Reid, 2019;AbdulQadir and Ahmed, 2018;Flor et al, 2018;Chuang et al, 2016;Lane et al, 2006;Zahra and George, 2002). Absorptive capacity construct comprises two subsets; potential absorptive capacity and realized absorptive capacity (Flor et al, 2018;Preston et al, 2017;Todorova and Durisin, 2007;Lane et al, 2006;Zahra and George, 2002).…”

“…In order to foster CE as an essential behavior in today's dynamic environment, firms need to focus on their absorptive capacity to assimilate, learn and employ new technological and product advancements (Kafouros et al, 2020;Vla ci c et al, 2019), as well as to integrate the various types of knowledge, relationships and resources (Rodrigo-Alarc on et al, 2018;Chuang et al, 2016;Zahra et al, 2009;Zahra and George, 2002). Absorptive capacity is a special capability that enables firms to recognize, value, assimilate and exploit the new external knowledge obtained from the external environment, and also from firms' various relationships (Mahmood and Mubarik, 2020;Rodrigo-Alarcon et al, 2018;Preston et al, 2017;Tortoriello, 2015;Zahra et al, 2009); enabling innovation (Reid, 2019;Preston et al, 2017;Tortoriello, 2015;Foss et al, 2013) and CE (Tortoriello, 2015;Zahra and George, 2002). As absorptive capacity capability is activated based on the recognition and exploitation of internal and external knowledge, it seems that social capital can play a fundamental role in enhancing absorptive capacity (Mahmood and Mubarik, 2020), and hence corporate entrepreneurial and innovative behaviors (Khan et al, 2020;Rodrigo-Alarc on et al, 2018;Preston et al, 2017;Li et al, 2014;Yim and Leem, 2013;Alguezaui and Filieri, 2010;Monnavarian and Ashena, 2009;Adler and Kwon, 2002).…”

Middle manager capabilities and organisational performance: the mediating effect of organisational capacity for change

“…Organisations with learning will facilitate and accelerate the emergence of change initiatives (Klarner et al , 2008), and they have a higher ability to form change strategies that allow them to maintain their competitive advantage (Calantone et al , 2002). Knowledge transfer in the long term between the organisational members will become a culture that accelerates the formation of innovative attitudes and changing achievements (Buono and Kerber, 2010; Reid, 2018) before increasing the OP (Ramezan et al , 2013).…”

Analysis of the causal effects of imports and foreign direct investments on indigenous innovation in developing countries

“…Taking up technologies from foreign countries is a major contribution to product innovation in many firms. Though absorptive capacity is distinct from innovation itself, it nevertheless is an important prerequisite for successful innovation (Reid, 2019). Aside from the role it plays as an input to innovation, R&D also serves as a platform for the diffusion and use of knowledge from foreign sources (Pierre and Bronwyn, 2013).…”