Can the Firm Hear It?
This explorable takes inspiration from the concept of absorptive capacity. This is a firm’s ability to recognize, assimilate, and apply outside knowledge. That ability depends partly on the related knowledge and capabilities the firm already possesses.
Firms are often surrounded by useful outside knowledge that never gets used. If we imagine the firm as a network—with outside scientific knowledge, internal capabilities, and operational problems as nodes—we can begin to see how these elements interact.
When new scientific knowledge enters the system, it might spark a new use for an internal capability, like scientists, engineers, or equipment. These capabilities can cluster, forming teams to solve problems relevant to the firm.
You can explore these dynamics by changing the parameter values and watching the nodes’ emergent behavior. For example, when internal circulation is high but problem proximity is remote, capabilities may cluster around one another with weak connections to the firm’s problems. When circulation is high and problem proximity is embedded, the same clustering occurs, but teams are pulled harder to salient problems causing excessive switching in the cluster.
What the parameters change
Outside knowledge supply controls how much potentially useful scientific knowledge exists around the firm.
Search reach controls how widely the firm looks for knowledge beyond its existing neighborhood.
Prior related knowledge affects whether the firm can recognize and absorb knowledge it encounters.
Internal circulation affects how readily knowledge and capabilities connect.
Problem proximity affects how strongly internal activity is pulled toward operational needs.
Sources:
Wesley M. Cohen and Daniel A. Levinthal, “Absorptive Capacity: A New Perspective on Learning and Innovation” (1990).
Shaker A. Zahra and Gerard George, “Absorptive Capacity: A Review, Reconceptualization, and Extension” (2002).
Gergana Todorova and Boris Durisin, “Absorptive Capacity: Valuing a Reconceptualization” (2007).