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2009, Vol. 52, No. 4, 822846.

ABSORPTIVE CAPACITY, ENVIRONMENTAL TURBULENCE,

AND THE COMPLEMENTARITY OF ORGANIZATIONAL
LEARNING PROCESSES
ULRICH LICHTENTHALER
WHUOtto Beisheim School of Management
Following the process-based definition of absorptive capacity, this article identifies
technological and market knowledge as two critical components of prior knowledge in
the organizational learning processes of absorptive capacity. Data from a multi-informant survey conducted in 175 industrial firms show that exploratory, transformative,
and exploitative learning have complementary effects on innovation and performance.
The results emphasize the multidimensional nature of absorptive capacity, and they
help to explain interfirm discrepancies in profiting from external knowledge. Moreover, the findings underscore the importance of dynamic capabilities in contexts
characterized by high degrees of technological and market turbulence.

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berda, 2005). However, research into internal innovation has shown that firms need to balance
exploratory and exploitative learning (Sidhu, Commandeur, & Volberda, 2007; Tushman & OReilly,
1996). Moreover, the benefits from learning
strongly depend on the degree of environmental
turbulence. For instance, internal exploitative
learning has positive effects in stable environments
and negative effects under dynamic conditions
(Jansen, Van den Bosch, & Volberda, 2006). As
these studies have focused on intrafirm processes,
external knowledge acquisition has been relatively
neglected (Katila & Ahuja, 2002). In particular, understanding of environmental influences and of interactions between the learning processes of absorptive capacity is limited (Lane et al., 2006; Tsai,
2001). This research deficit is further emphasized
by strong interfirm discrepancies in successfully
utilizing external knowledge (Cassiman & Veugelers, 2006).
Therefore, this article addresses the following
critical question: How do interactions between the
learning processes of absorptive capacity influence
innovation and performance under different environmental conditions? Drawing on a dynamic capabilities perspective, I contribute to the literature
by detailing the process stages associated with the
three learning processes. Moreover, technological
and market knowledge are identified as critical
components of prior knowledge. On this basis, I
examine the complementarity of the learning processes and the moderating effects of technological
and market turbulence (Jaworski & Kohli, 1993).
These analyses deepen the understanding of absorptive capacity, and they help to reconcile inconsistent prior findings. Thus, the current work ad-

Firms increasingly rely on external knowledge to

foster innovation and to enhance their performance
(Ireland, Hitt, & Vaidyanath, 2002; Zollo, Reuer, &
Singh, 2002). Although some pioneering firms,
such as Procter & Gamble, have achieved major
benefits, many others experience strong difficulties
in profiting from external knowledge (Cassiman &
Veugelers, 2006; Huston & Sakkab, 2006). Because
of the managerial challenges of interfirm knowledge transfer, absorptive capacity (Cohen &
Levinthal, 1990) is a major source of competitive
advantage (Tsai, 2001; Zahra & George, 2002). A
recent process-based definition is that absorptive
capacity is a firms ability to utilize external knowledge through the sequential processes of exploratory, transformative, and exploitative learning
(Lane, Koka, & Pathak, 2006). Exploratory learning
refers to acquiring external knowledge, and it corresponds to the notion of potential absorptive capacity (Zahra & George, 2002). Exploitative learning relates to applying acquired knowledge, and it
reflects the concept of realized absorptive capacity
(Zahra & George, 2002). Transformative learning
links these two processes, and it refers to maintaining knowledge over time (Garud & Nayyar, 1994).
To date, researchers insights into these learning
processes have been limited, and few empirical
studies have captured absorptive capacitys multidimensional nature (Jansen, van den Bosch, & Vol-

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The author would like to thank Associate Editor Wenpin Tsai and the three anonymous reviewers for their
insightful comments and suggestions during the review
process. A prior version of this paper was presented at
the 2008 annual meeting of the Academy of Management
in Anaheim.

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dresses all five critical limitations of absorptive

capacity research (Lane et al., 2006). First, I examine the learning processes to complement the prior
focus on knowledge content. Second, I refine the
concept by specifying relevant prior knowledge.
Third, absorptive capacitys multidimensional nature is captured. Fourth, the learning processes are
operationalized with new measures. Finally, I use
data from a large sample of industrial firms to analyze the effects of absorptive capacity on innovation and performance at different degrees of environmental turbulence. These effects are at the core
of absorptive capacity, but existing evidence based
on proxies for prior knowledge is inconsistent, and
environmental influences have hardly been taken
into account (Lane et al., 2006).
The complementarity of multiple learning processes, which has been relatively neglected in prior
organizational learning research, is most relevant
in light of increasing interfirm knowledge transfer
(Lane et al., 2006; Song, Droge, Hanvanich, &
Calantone, 2005). In particular, the current findings
help to explain interfirm differences in profiting
from external knowledge (McEvily & Marcus,
2005). Moreover, the study contributes to capability-based theory by providing evidence for the
importance of dynamic capabilities in contexts
characterized by high degrees of technological and
market turbulence (Helfat et al., 2007). Finally, this
article has implications for emerging themes in
knowledge management, including firm boundaries (Argote, McEvily, & Reagans, 2003). As
knowledge boundaries may not match organizational boundaries, my analyses provide support for capability-based perspectives in boundaries research,
which go beyond efficiency-based analyses such as
transaction costs (Santos & Eisenhardt, 2005). Furthermore, the two components of prior knowledge
contribute to broader understanding of experience
in managing knowledge (Argote et al., 2003).

According to Helfat et al., A dynamic capability is

the capacity of an organization to purposefully create, extend, or modify its resource base (2007: 4).
The benefits of dynamic capabilities depend on
underlying learning processes, and it is difficult to
observe a dynamic capability unless it is put into
use. Learning processes are the mechanisms that
make that happen (Eisenhardt & Martin, 2000; Helfat et al., 2007). Therefore, recent work has developed a process-based view of absorptive capacity in
which a firm stock of prior knowledge constitutes
the basis for knowledge flows within the three
learning processes (Lane et al., 2006). This view of
learning processes as contributing to dynamic capabilities is consistent with prior research into organizational learning, search behavior, and problem solving (Argote et al., 2003; Huber, 1991; Katila
& Ahuja, 2002).
As the managerial challenges posed by the three
learning processes differ, distinct components of
prior knowledge may be critical in the three learning processes of absorptive capacity (Garud & Nayyar, 1994; Jansen et al., 2006; March, 1991). Regarding a firms prior knowledge, multiple authors have
distinguished the following two knowledge components: technological knowledge and market knowledge (Kogut & Zander, 1992; Shane, 2000; Song et
al., 2005). Technological knowledge is the knowledge that a firm actually explores, transforms, and
exploits in its absorptive capacity processes (Cohen
& Levinthal, 1990; Tsai, 2001). For instance, a firm
recognizes a new technology, which could be acquired from an external technology source (Cassiman & Veugelers, 2006; Rothaermel & Deeds, 2004).
Market knowledge, by contrast, refers to applications and commercialization opportunities for
technological knowledge (Teece, 2007; van den
Bosch, Volberda, & de Boer, 1999). Thus, market
knowledge provides a firm with insights into the
functions that technological knowledge may fulfill.
For example, a firm identifies new applications of a
technology in additional markets (Narasimhan, Rajiv, & Dutta, 2006).
The distinction between prior technological and
market knowledge allows for integrating Shanes
(2000) finding that technological change does not
generate obvious opportunities. Separate technological and market knowledge has only limited
value, whereas their combination enables value
creation (Song et al., 2005). Following prior work
into external knowledge acquisition, the current
study focuses on industrial firms absorption of
external technological knowledge (Cassiman &
Veugelers, 2006). Thus, I only consider the absorption of technological knowledge, but many interfirm relationships are directed at accessing market

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THEORY AND HYPOTHESES

Organizational Learning Processes
Cohen and Levinthals (1990) basic assumption
is that prior related knowledge determines a firms
level of absorptive capacity (Lane et al., 2006; Tsai,
2001). Firms need some knowledge overlap with an
external knowledge source to successfully absorb
new knowledge, but a very strong overlap limits the
possibilities of gaining new insights (Lord & Ranft,
2000; Mowery, Oxley, & Silverman, 1996). This
path-dependent understanding is underlined in capability-based reconceptualizations of absorptive
capacity (Lane et al., 2006; Zahra & George, 2002).

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knowledge (Haspeslagh & Jemison, 1987; Inkpen &

Dinur, 1998). Industrial firms need both components of prior knowledge to successfully coordinate
the learning processes of absorptive capacity (Cohen & Levinthal, 1990; van den Bosch et al., 1999).
Technological and market knowledge are complementary, and their integration in organizational
learning likely enhances innovation and performance (Lane et al., 2006; Song et al., 2005). As a
firms environment may affect the impact of absorptive capacity, the influence of environmental
turbulence is addressed in the following section.
Environmental Turbulence
A firms innovation processes are embedded in
an environmental context (Jansen et al., 2006;
Levinthal & March, 1993). Although a firm may
partly influence its external environment over
time, dynamic capabilities are context-dependent
(Song et al., 2005; Teece, 2007). The environment is
important to analyzing the effects of absorptive capacity because different environments imply different valuations of dynamic capabilities (Eisenhardt
& Martin, 2000). As turbulent environments increase causal ambiguity, competitors ability to
imitate a firms capabilities decreases, and this
limitation may help firms to achieve superior innovation and performance based on their dynamic
capabilities (Helfat et al., 2007; Song et al., 2005).
However, it can also be argued that a firms capabilities lead to organizational inertia in turbulent
environments (Leonard-Barton, 1992). Thus, the
impact of absorptive capacity may substantially
differ according to the level of environmental turbulence, but these boundary conditions have been
relatively neglected in prior absorptive capacity research (Lane et al., 2006).
This limited attention is remarkable, because
firms often acquire external knowledge specifically
to respond to turbulent environments, and this strategic action underscores the importance of environmental influences (Cassiman & Veugelers, 2006). In
keeping with the distinction between technological
and market knowledge noted above, prior research
into dynamic capabilities has emphasized the importance of technological and market turbulence
(Droge, Calantone, & Harmancioglu, 2008; Song et
al., 2005). Technological turbulence refers to the
rate of technological change (Jaworski & Kohli,
1993; Lichtenthaler & Ernst, 2007). Market turbulence relates to the degree of instability and uncertainty within a firms markets (Helfat et al., 2007;
Jaworski & Kohli, 1993). Prior research into internal
learning processes has emphasized the different
effects of environmental turbulence on exploratory

and exploitative learning (Droge et al., 2008; Jansen

et al., 2006), Therefore, I specify the influence of
technological and market turbulence in the following analysis of the three learning processes of absorptive capacity.

Exploratory Learning Processes

In the process view of absorptive capacity, exploratory learning refers to knowledge acquisition
(Lane et al., 2006). As research on internal exploratory learning (McGrath, 2001) has suggested,
knowledge acquisition does not ensure successful
knowledge application. Starting with a knowledge
need, many firms have established scanning mechanisms to recognize external knowledge sources
(Cohen & Levinthal, 1990; Daft & Weick, 1984;
Elenkov, 1997). On this basis, firms assimilate
knowledge by integrating it into their knowledge
bases (Lenox & King, 2004). Here, a detailed understanding of all relevant problem-solving methods is
critical to facilitate subsequent knowledge application (Khanna, Gulati, & Nohria, 1998; Larsson,
Bengtsson, Henriksson, & Sparks, 1998). Accordingly, exploratory learning in the context of absorptive capacity comprises two essential process stages: recognizing external knowledge and
assimilating this knowledge (Arbussa` & Coenders, 2007). Thus, exploratory learning specifically
refers to knowledge acquisition (Lane et al., 2006).
For instance, it does not relate to exploitation alliances, which are directed at generating synergies
from existing knowledge (Koza & Lewin, 1998;
Rothaermel & Deeds, 2004).
In exploratory learning, prior related knowledge
is essential (Szulanski, 1996). For the successful
acquisition of external technological knowledge,
firms need both components of prior knowledge, but
they tend to have enough market knowledge because
they usually acquire knowledge for a particular application (Todorova & Durisin, 2007). Accordingly,
prior technological knowledge is critical because it
helps firms to recognize external knowledge
sources and to assimilate knowledge (Zahra &
George, 2002). This view of technological knowledge as the essential knowledge component in exploratory learning is consistent with the work of
Cohen and Levinthal (1990), who used a firms R&D
expenditures as a proxy for absorptive capacity.
Thus, interfirm differences in exploratory learning
are likely determined by different levels of technological knowledge (Jansen et al., 2005).
Based on prior technological knowledge, exploratory learning is essential for reconfiguring a firms
knowledge base (Garud & Nayyar, 1994; March,

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1991). A high level of exploratory learning helps

firms to acquire external knowledge and to sustain
superior performance based on first mover advantages, strategic flexibility, responsiveness to customers, and avoidance of lock-out effects and
competency traps (Hamel, 1991; Leonard-Barton,
1992; Zahra & George, 2002). External knowledge
acquisition requires fewer resources than internal
knowledge exploration (Cassiman & Veugelers,
2006; Cohen & Levinthal, 1990). Access to external
knowledge eases the constraints imposed on firms
by a scarcity of internal resources (Gupta, Smith, &
Shalley, 2006; Katila & Ahuja, 2002). Thus, potentially negative effects of excessive internal exploration are likely limited in external knowledge exploration, which rather helps firms to achieve superior
innovation and performance (Siggelkow & Rivkin,
2006; Zahra & George, 2002).
Dynamic capabilities logic suggests that the need
for exploratory learning is particularly high in turbulent environments, which rapidly make current
products obsolete (Eisenhardt & Martin, 2000;
Teece, 2007). As a consequence, firms have to rely
on exploratory learning to arrive at innovations that
depart from existing technologies and markets
(Droge et al., 2008; Jansen et al., 2006). Exploratory
learning can help firms to capitalize on changing
environmental conditions by creating new products and meeting the needs of emerging markets
(Jansen et al., 2006; Levinthal & March, 1993). A
recent empirical study has shown that environmental turbulence positively moderates the relation between internal exploratory learning and firm performance (Jansen et al., 2006). In a similar vein,
exploratory learning in the context of absorptive
capacity likely becomes more important in turbulent environments. Under these conditions, firms
often actively acquire external knowledge because
they are unable to internally respond to all technological and market developments (Cassiman &
Veugelers, 2006). Thus, the tasks of recognizing
and assimilating external knowledge become central success determinants (Zahra & George, 2002).
In keeping with research on internal innovation
(Jansen et al., 2006), I therefore expect that high
levels of exploratory learning strongly contribute to
innovation and performance in turbulent environments. In relatively stable environments, this positive effect will be less strong because firms are in a
better position to capture value from existing technologies and markets (Eisenhardt & Martin, 2000;
Teece, 2007). This suggests:

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atory learning of absorptive capacity on innovation and performance.

Transformative Learning Processes
Transformative learning links exploratory and
exploitative learning, and it refers to retaining
knowledge over time (Garud & Nayyar, 1994; Lane
et al., 2006). Exploratory and exploitative learning
are insufficient for sustaining superior performance
when cumulative knowledge is involved, entry
timing is important, or an environment is highly
dynamic (Argote et al., 2003; Garud & Nayyar,
1994). To avoid losing skills and routines, firms must
actively manage knowledge retention to keep assimilated knowledge alive (Lane et al., 2006; Marsh &
Stock, 2006). For subsequent exploitation, the maintained knowledge has to be reactivated by internalizing it again through experience (Argote et al., 2003;
Marsh & Stock, 2006). According to Garud and Nayyar (1994), transformative learning of absorptive capacity comprises two essential stages: maintaining
assimilated knowledge and reactivating this knowledge (Lane et al., 2006; Marsh & Stock, 2006).
To successfully retain knowledge, firms need
sufficient prior technological and market knowledge (Marsh & Stock, 2006; Teece, 2007). Given that
learning tends to be local, the two components of
prior knowledge contribute to explaining path dependencies in transformative learning (Ernst, 2001;
Kogut & Zander, 1992). The more technological
knowledge a firm has, the easier it is for it to maintain and reactivate additional knowledge (Garud &
Nayyar, 1994). Market knowledge is important for
deciding to maintain knowledge, for combining it
with other knowledge, and for reactivating it
(Marsh & Stock, 2006). Thus, a firm needs prior
market and technological knowledge to maintain
knowledge. In contrast to exploratory and exploitative learning, neither technological nor market
knowledge tends to be present in firms at sufficient
levels. Accordingly, differences in both components of prior knowledge likely influence interfirm
differences in transformative learning (Argote et al.,
2003; Garud & Nayyar, 1994).
Transformative learning is essential because assimilated knowledge sometimes has to be maintained for years until it is finally applied in new
products (March, 1991; Rothaermel & Deeds, 2004).
The failure to maintain and reactivate knowledge
may have effects that are as detrimental as the
complete lack of assimilated knowledge (Argote et
al., 2003; Marsh & Stock, 2006). By contrast, firms
with prior technological and market knowledge
may flexibly adapt to environmental changes and
avoid core rigidities by maintaining a large knowl-

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Hypothesis 1. Technological and market turbulence positively moderate the effect of explor-

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edge base (Teece, 2007). As transformative learning

affects the knowledge stock that may be applied in
exploitative learning, it is imperative for achieving
superior innovation and performance based on retaining assimilated knowledge (Garud & Nayyar,
1994; Lane et al., 2006).
Prior research has highlighted the need for transformative learning in turbulent environments
(Marsh & Stock, 2006). External knowledge acquisition per se is insufficient under highly dynamic
conditions, which pose considerable knowledge retention challenges (Garud & Nayyar, 1994; Marsh &
Stock, 2006). It could be argued that the importance
of transformative learning decreases in turbulent
environments because of new developments,
which reduce the need for retaining knowledge.
However, new knowledge is often cumulatively
generated from existing knowledge (Kogut &
Zander, 1992; Walsh & Ungson, 1991). This pathdependent development of technologies and markets suggests that knowledge retention becomes
more important as environmental turbulence increases (Helfat et al., 2007; Marsh & Stock, 2006).
Prior knowledge facilitates the acquisition of additional external knowledge, which is particularly
relevant in turbulent environments (Cohen &
Levinthal, 1990). I therefore expect that transformative learning of absorptive capacity has a strong and
positive effect in highly turbulent environments
(Garud & Nayyar, 1994). This positive effect is
likely lower in stable environments, where the rate
of knowledge generation and the need for acquiring
external knowledge are limited (Droge et al., 2008).
Hence,

cess stages: transmuting the assimilated knowledge

and applying this knowledge (Lane et al., 2006;
Todorova & Durisin, 2007).
To successfully exploit technological knowledge,
a firm needs prior market knowledge (Jansen et al.,
2005). After assimilating external knowledge, a
firm usually has an in-depth understanding of the
technological knowledge (Cassiman & Veugelers,
2006). Market knowledge therefore determines if
exploitation opportunities are discovered and in
which areas they are discovered (Shane, 2000;
Smith et al., 2005). As new applications are often
generated by combining existing technologies with
new market knowledge, exploitation performance
is usually greatest in familiar markets (Kogut &
Zander, 1992; Tsai & Ghoshal, 1998). Market
knowledge is the critical component of prior
knowledge in transmuting and applying assimilated knowledge (Teece, 2007; van den Bosch et al.,
1999). Thus, interfirm differences in exploitative
learning are likely influenced by market knowledge
differences (Narasimhan et al., 2006).
Firms with a high level of exploitative learning
may achieve superior performance by using assimilated knowledge in innovation processes (Zahra &
George, 2002). Because of the importance of combining new and existing knowledge, exploitative
learning helps firms to develop new perceptual
schemata (Jansen et al., 2005). Beyond matching
knowledge with applications, exploitative learning
converts knowledge into new products (Tsai,
2001). By means of acquiring external knowledge,
firms renew their knowledge bases (Narasimhan
et al., 2006). Therefore, the potential negative consequences of excessive internal exploitation are
likely limited in the exploitation of assimilated external knowledge (March, 1991; Todorova & Durisin, 2007). Based on prior market knowledge, exploitative learning rather determines to what
degree assimilated knowledge is converted into
new products (Zahra & George, 2002).
Earlier research has underlined the benefits from
exploitative learning in stable environments because it helps firms to capitalize on their existing
technologies and markets (Droge et al., 2008; Gupta
et al., 2006). For dynamic environments, by contrast, a recent study has shown negative performance effects of internal exploitative learning
(Jansen et al., 2006). A high level of internal exploitation may lead to an overemphasis on existing
markets and technologies, which are less and less
valued by a rapidly changing environment
(Levinthal & March, 1993; Tushman & OReilly,
1996). This argument applies to internal innovation, but it likely does not hold for exploitative
learning within the context of absorptive capacity.

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Hypothesis 2. Technological and market turbulence positively moderate the effect of transformative learning of absorptive capacity on innovation and performance.

Exploitative Learning Processes

According to the process-based definition of absorptive capacity, exploitative learning focuses on
knowledge in the context of a product or service,
and it goes beyond assimilating external knowledge
(Lane et al., 2006). In particular, exploitative learning is associated with matching knowledge and
markets (Lenox & King, 2004; Rothaermel & Deeds,
2004). After determining potential applications, a
firm applies the knowledge, and this constitutes
the actual exploitation step (Smith, Collins, &
Clark, 2005). Thus, exploitative learning does not
refer exclusively to final knowledge application.
Instead, exploitative learning in the context of absorptive capacity comprises the following two pro-

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Here, firms transmute and apply assimilated

knowledge (Lane et al., 2006). Thus, the danger of
organizational inertia is low because a firm extends
its internal knowledge base with external knowledge (Leonard-Barton, 1992). Moreover, firms likely
do not develop high levels of exploitative learning to
apply assimilated knowledge if they lack sufficient
levels of the other learning processes to assimilate
and maintain external knowledge in the first
place (Lane et al., 2006). Accordingly, the risks of
excessive levels of exploitative learning are
likely limited in the development of absorptive
capacity (Zahra & George, 2002). As exploitative
learning is critical to profiting from assimilated
knowledge, its importance likely increases in turbulent settings, where firms tend to strongly rely on
external knowledge (Cassiman & Veugelers, 2006).
In contrast to the argument above on internal innovation, my argument regarding exploitative learning is that its positive impact will increase rather
than decrease in highly turbulent environments.
Hence,
Hypothesis 3. Technological and market turbulence positively moderate the effect of exploitative learning of absorptive capacity on innovation and performance.

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The three learning processes have distinct functions in firms utilizing external knowledge (Lane et
al., 2006). In exploratory learning, a firm usually
has enough market knowledge because it acquires
external technological knowledge for a particular
application. Thus, technological knowledge represents the critical knowledge component in exploratory learning (Cohen & Levinthal, 1990). By contrast,
market knowledge is imperative in exploitative learning. Here, firms have assimilated technological
knowledge and identify new applications (Todorova
& Durisin, 2007). For transformative learning, the
two components seem equally important because
knowledge retention depends on prior technological
and market knowledge (Argote et al., 2003). The pathdependent development of the learning processes
therefore has to involve both knowledge components,
and this is illustrated by the need for complementary
assets in technology exploitation (Teece, 2007; Zahra
& George, 2002).
Because of resource constraints in internal innovation, high levels of one learning process often
imply low levels of other processes (Gupta et al.,
2006; March, 1991). In external knowledge acquisition, however, firms need fewer resources, and
external knowledge additionally reduces some neg-

ative effects of high levels of one learning process

(Katila & Ahuja, 2002). Accordingly, the three
learning processes are not mutually exclusive, and
high levels of all of them may coexist (Lane et al.,
2006). In support of this perspective, prior studies
have shown that firms may simultaneously pursue
exploratory and exploitative learning in external
knowledge acquisition (Katila & Ahuja, 2002;
Nerkar, 2003). Beyond the potential coexistence of
the three learning processes, they are likely complementary because their impact on innovation and
performance seems to depend on one another (Lane
et al., 2006; Zahra & George, 2002).
The theory of complementarities is informative
as to the superadditive value of resource combinations (Tanriverdi & Venkatraman, 2005). It defines
a set of processes as complementary when more of
any one of them increases the returns to doing more
of the others (Cassiman & Veugelers, 2006; Milgrom
& Roberts, 1995). Complementary learning processes are distinct, but they are interdependent and
mutually supportive (Harrison, Hitt, Hoskisson, &
Ireland, 2001; Ichniowski, Shaw, & Prennushi,
1997). Thus, there is usually a positive correlation
between complementary variables (Arora, 1996;
Cassiman & Veugelers, 2006). The benefits obtained
from the joint adoption of complementary learning
processes are greater than the sum of benefits obtained from the isolated adoption of single processes (Milgrom & Roberts, 1995; Song et al., 2005).
For instance, a firm with strong exploitative learning may generate many innovations from a small
base of assimilated knowledge. By contrast, a firm
may also fail to apply assimilated knowledge because of limited exploitative learning (Zahra &
George, 2002). As profits are primarily generated in
exploitative learning, firms may tend to excessively
strengthen this process (Todorova & Durisin, 2007).
However, the positive effects of exploitative learning materialize to a limited degree if the level of
knowledge exploration and retention is limited
(Katila & Ahuja, 2002).
Given this trade-off, learning processes need to
be balanced because the marginal utility of enhancing one process is rather low in firms in which the
other processes are relatively scarce (Gupta et al.,
2006). Absorptive capacity likely forms a whole
that is greater than the sum of the three processes.
First, a complementary bundle of learning processes provides unique value to a firm (Harrison et
al., 2001). The synergies from the three processes
lead to benefits that exceed the positive effects of
the individual processes. Second, a bundle of complementary processes is difficult to observe and
imitate because it is less obvious than the individual processes (Song et al., 2005). Competitors will

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get little benefit from imitation unless they imitate

a firms overall absorptive capacity (Todorova &
Durisin, 2007). Like a failure in one learning process, the imitation of a single process may have
negative effects (March, 1991). The complementarity assumption is consistent with the finding that
successful firms in internal innovation simultaneously pursue exploratory and exploitative learning (Tushman & OReilly, 1996).
The simultaneous development of the learning
processes can be interpreted as an indication that a
firm recognizes complementarities and seeks to enhance its overall absorptive capacity (Song et al.,
2005; Tanriverdi & Venkatraman, 2005). In assessing the performance effects of complementary
learning processes, the effects of individual processes have to be compared with the overall effect
of absorptive capacity to define the conditionality
of individual processes on one another and to ensure that the overall effect outweighs the individual
effects (Ichniowski et al., 1997; Whittington, Pettigrew, Peck, Fenton, & Conyon, 1999). Complementarity analyses require a simultaneously aggregated and disaggregated approach that compares
the contributions of individual practices with the
performance payoffs of them altogether (Whittington et al., 1999: 585). In addition to forwarding
hypotheses concerning the individual processes, I
therefore argue that the complementarity of the three
learning processes has a positive effect on innovation
and performance. Hypotheses 13 do not imply that
the learning processes necessarily have independent
direct effects. Instead, my arguments suggest that the
individual processes may affect innovation and performance at least partly through their complementarity in absorptive capacity. Thus, I assume that the
complementarity of the three processes has additional explanatory power and posit:

al., 2006). In particular, it is difficult to predict

future developments under highly dynamic conditions (Droge et al., 2008). Here, the importance of
prior technological and market knowledge increases because a large knowledge base helps firms
to access additional knowledge and to successfully
proceed on their development paths (Teece, 2007).
Thus, the positive effects of complementary learning processes are likely greater in turbulent settings (Song et al., 2005). Besides affecting the
individual learning processes, environmental
turbulence tends to increase the positive effects
that derive from their complementarity within the
context of absorptive capacity. Accordingly:
Hypothesis 5. Technological and market turbulence positively moderate the effect of absorptive capacity on innovation and performance.

Hypothesis 4. The complementarity of exploratory, transformative, and exploitative learning of absorptive capacity has a positive effect
on innovation and performance.
According to the dynamic capabilities approach,
the value of capabilities likely grows in turbulent
environments (Teece, 2007). As these environments augment causal ambiguity, competitors possibilities of imitating complementary learning processes decrease (Helfat et al., 2007). Because of
acquiring external knowledge, potentially negative
effects of organizational inertia are limited in
absorptive capacity processes (Leonard-Barton,
1992). In turbulent environments, firms tend to
strongly rely on external knowledge (Droge et al.,
2008). Thus, the impact of absorptive capacity on
innovation and performance grows (Narasimhan et

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Sample and Data Collection

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The study focused on medium-sized and large

industrial firms. I studied neither small companies
nor service firms. In industrial companies, external
knowledge acquisition is complementary to internal R&D, which contributes to developing prior
technological knowledge (Cassiman & Veugelers,
2006). Moreover, these firms apply technological
knowledge in their products, and they have market
knowledge in different areas. After a thorough literature analysis, I developed a conceptual framework and formulated hypotheses that were entirely
based on the insights from prior research. Then, I
conducted interviews to analyze whether the theoretical understanding of the learning processes reflected managerial challenges. First, I used these
interviews to ensure that experts from different industries were able to distinguish multiple learning
processes. Second, I examined whether the process
stages that were identified conceptually constituted the critical tasks of external knowledge acquisition in practice.
After five preliminary unstructured interviews
had been conducted, questionnaires based on the
literature review were developed and used for
semistructured interviews in 30 firms. Furthermore, I studied additional documents, such as internal analyses of technology acquisition activities
and external publications. In response to the need
for deep understanding and local contextualization, this procedure facilitated high comparability
and provided ample opportunity for unobstructed
narration (Miles & Huberman, 1994). The interview
process followed suggestions in the literature
(Eisenhardt, 1991; Yin, 2003). In all firms, the head

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of R&D or a high-ranking technology manager was

interviewed. In 15 firms, I also interviewed a second person to gain a more detailed picture of the
learning processes. In 10 firms, this second informant was active in the marketing department. In 5
firms, this person was active in the business development or innovation management department. Altogether, 45 persons were interviewed in 30 European industrial firms. Eleven of these firms were
active in automotive/machinery; 10 firms were in
chemicals/pharmaceuticals; and 9 firms were in
semiconductors/electronics. The choice of industries was influenced by prior work reporting different knowledge strategies in these industries (e.g.,
Lichtenthaler & Ernst, 2007).
Basically, the interviews reflected the insights
from the literature. Supporting the assumed distinctness of the learning processes, for instance,
many industry experts underlined the variety of
challenges that they faced in profiting from external knowledge. Moreover, the interviewees emphasized the importance of the process stages that had
been identified conceptually. Some also acknowledged that they successfully integrated external
knowledge but often failed to store and apply this
knowledge in new products. These statements reflected my assumptions on the complementarity of
the learning processes. Therefore, the framework that
was derived from the literature analysis was used to
conduct a survey, which was directed at understanding the impact of the three learning processes.
To reach a representative sample of mediumsized and large industrial firms, I approached the
300 largest firms based on revenues in the following sectors in Germany: automotive/machinery,
chemicals/pharmaceuticals, and semiconductors/
electronics. To limit common method bias, I collected data for the independent and dependent
variables from two informants. Two different questionnaires, which only overlapped with the items
for the dependent variables, innovation and performance, were administered. Eighteen hundred persons in 900 firms were identified as potential
participants. On the basis of the interviews, I identified the head of R&D as the first informant for the
three learning processes. Depending on a firms
organizational structure, the second informant with
expert knowledge about innovation, performance,
and environmental turbulence was the head of corporate marketing, innovation management, or business development. Both informants strongly interacted with other employees, further deepening
their knowledge about a firms innovation processes. Informant competency measures indicated
that they were highly knowledgeable about the
questions asked for this study.

I first contacted the potential informants by

phone to acquire their consent and to encourage
their participation. Those who consented received
an e-mail with a personal letter and a questionnaire, which was administered in English, given
that the literature base from which measurement
scales were derived was exclusively in English.
Although not all informants were native English
speakers, nearly all of the firms were international
companies, and English often was the official language. An introductory text included a description
of the major relevant concepts (e.g., external knowledge acquisition). In addition, detailed pretests indicated that the language did not compromise a
homogeneous understanding of the items. To boost
the response rate, follow-up phone calls were conducted and reminder e-mails were sent. Four hundred fifty-seven persons participated in the study,
corresponding to a response rate of 25.4 percent. A
t-test for nonresponse bias showed no significant
differences between the firms of the respondents
and nonrespondents regarding several variables,
such as industry, revenues, and return on sales.
Early and late respondents did not differ on these
measures either. Of the 457 responses, 246 were
from the first informant, and 211 were from the
second informant. On this basis, there were 175
matched pairs with the data from both informants
needed for my analyses. Thus, the final sample
comprised 175 firms, and it shows a reasonable
spread across industries: automotive/machinery
(34.3 percent), chemicals/pharmaceuticals (33.1
percent), and electronics/semiconductors (32.6
percent). After data processing, I conducted additional interviews with experts from 10 firms to
discuss the studys findings. These interviews supported my interpretation of the results, including
those concerning the complementarity of the learning processes and the role of R&D intensity.

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Measures
To measure innovation and firm performance, I
used existing measures. However, appropriate
scales for the learning processes were not available.
Therefore, they were specifically generated for this
study on the basis of descriptions and measures of
related constructs (e.g., Jansen et al., 2005; Smith
et al., 2005; Szulanski, 1996). Moreover, the insights from the interviews were taken into account.
In developing these scales, I followed suggestions
in the literature (Bagozzi & Yi, 1988). The Appendix presents these measurement scales. With one
exception, the anchor points for item rating were 1,
strongly disagree, to 7, strongly agree. For subjective firm performance, the anchor points were 1,

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TABLE 1
Results of Exploratory Factor Analysisa
Variables
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item
Item

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

Mean

s.d.

Minimum

Maximum

Recognize

Assimilate

Maintain

Reactivate

Transmute

Apply

4.87
5.14
4.66
4.98
5.02
4.05
3.72
4.07
3.88
4.85
4.83
4.71
4.11
4.93
4.72
4.57
4.97
4.92
4.71
4.80
4.96
4.72
5.01
4.57
4.80

1.61
1.50
1.46
1.38
1.47
1.50
1.60
1.50
1.38
1.38
1.44
1.41
1.40
1.26
1.42
1.30
1.30
1.31
1.40
1.21
1.19
1.40
1.35
1.33
1.34

1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00

7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00
7.00

.74
.77
.74
.78
.82
.37
.01
.17
.15
.25
.24
.14
.10
.27
.22
.32
.22
.20
.24
.26
.23
.24
.35
.09
.10

.20
.10
.34
.24
.15
.64
.88
.67
.70
.07
.08
.23
.21
.00
.05
.05
.05
.04
.19
.11
.02
.13
.11
.10
.11

.31
.21
.16
.15
.22
.06
.09
.18
.10
.75
.83
.62
.65
.22
.24
.10
.15
.10
.09
.19
.21
.13
.32
.16
.25

.30
.29
.21
.30
.18
.04
.01
.06
.04
.23
.22
.19
.02
.77
.78
.61
.69
.32
.14
.26
.36
.16
.24
.10
.21

.21
.25
.19
.23
.20
.00
.18
.04
.01
.08
.09
.16
.15
.26
.13
.15
.31
.62
.75
.73
.64
.26
.15
.30
.17

.13
.19
.21
.11
.22
.12
.03
.06
.13
.08
.15
.23
.32
.16
.13
.36
.14
.27
.28
.25
.26
.68
.62
.76
.67

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Descriptive statistics and results of common factor analysis with varimax rotation and Kaiser normalization. Boldface indicates the six
factors derived.

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much worse, to 7, much better (Reinartz,

Krafft, & Hoyer, 2004).
Learning processes. To examine the three learning processes, I relied on the first informant and
measured the activities that were identified as the
critical tasks of the learning processes. An exploratory factor analysis with varimax rotation and
Kaiser normalization (Hair, Anderson, Tatham, &
Black, 2006) resulted in a six-factor solution with
the items showing clean loadings on their respective
constructs. Table 1 gives these results. Exploratory
learning comprises the activities of recognizing and
assimilating external knowledge. The five-item scale
recognize ( .96) captures a firms activities of
environmental scanning and monitoring. Moreover, it measures the examination of industry information and the observation of external knowledge sources. The scale partly draws on existing
items in prior absorptive capacity research (Arbussa` & Coenders, 2007; Jansen et al., 2005; Szulanski, 1996). Some of the items were developed in
absorptive capacity studies based on earlier research into environmental scanning. The four-item
scale assimilate ( .81) addresses the activities of
absorbing knowledge from external sources. It captures whether firms regularly approach and meet
with external knowledge sources. Moreover, it re-

fers to a firms competencies of inward knowledge

transfer. The items were based on related constructs in the literature (Arbussa` & Coenders, 2007;
Jansen et al., 2005; Szulanski, 1996).
Transformative learning refers to the activities of
maintaining and reactivating knowledge. The fouritem scale maintain ( .87) captures a firms
activities of retaining and storing knowledge. Moreover, it addresses knowledge sharing and communication inside the firm. The items were based on
insights from prior research (Jansen et al., 2005;
Marsh & Stock, 2006; Smith et al., 2005). The fouritem scale reactivate ( .89) captures whether a
firm can quickly react to opportunities by relying
on its existing knowledge. Furthermore, it measures a firms proficiency in addressing environmental changes by reactivating its knowledge. The
items build on prior research into knowledge retention (Garud & Nayyar, 1994; Jansen et al., 2005;
Marsh & Stock, 2006).
Exploitative learning comprises the activities of
transmuting and applying knowledge. The fouritem scale transmute ( .86) captures a firms
proficiency in combining new and existing knowledge. In addition, it addresses the matching of technologies with new product ideas. Thus, it builds on
prior research (Jansen et al., 2005; Smith et al.,

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2005; Todorova & Durisin, 2007). Finally, the fouritem scale apply ( .86) addresses whether firms
easily implement technologies in new products and
if they constantly consider how to better exploit technologies. Furthermore, the scale captures whether a
firm regularly implements adaptations to its products. The items were based on existing scales for
related constructs (Jansen et al., 2005; Smith et al.,
2005; Szulanski, 1996). After eliminating unreliable
items, I conducted confirmatory factor analyses,
which are described in the Results section.
Innovation and performance. Following prior
absorptive capacity research (Tsai, 2001), I used
innovation and performance as two distinct dependent variables. For measuring innovation ( .85),
I relied on a scale used in many prior studies (Dyer
& Song, 1997; Song, Dyer, & Thieme, 2006). It comprises the following three items: The overall performance of our new product development program has met our objectives, From an overall
profitability standpoint, our new product development program has been successful, and Compared with our major competitors, our overall new
product development program is far more successful. To capture performance, I relied on a scale for
perceptual performance developed by Reinartz et
al. (2004) and based on prior work (Jaworski &
Kohli, 1993). It comprises four items ( .89) with
the stem, Relative to your competitors, how does
your firm perform concerning the following statements: achieving overall performance, attaining market share, attaining growth, current
profitability. The items on innovation and performance were answered by the second informant in
each firm, and they were additionally included in
the questionnaire for the first informant. The intraclass correlation coefficient between the informants is .75 for innovation and .71 for performance. These values can be considered high (Hoegl
& Gemuenden, 2001). In the analyses, I used the
data of the second informant to limit common
method bias. In keeping with the high intraclass correlation, additional analyses with the data from the
first informant led to equivalent results. To crossvalidate the subjective performance measures with
objective data on financial performance for the year of
the survey and for the subsequent year, I additionally
collected data on a popular financial indicator of
profitability, return on sales (ROS), from financial
databases and annual reports. The results of these
analyses, which are not reported in this article, are
consistent with the findings that are described below.
Environmental turbulence. To examine environmental turbulence, I relied on the second informant. The scale for technological turbulence (

.72) is based on Jaworski and Kohli (1993), and

many other studies have used this scale (e.g., Sethi
& Iqbal, 2008). The final construct in the study
consists of the following five items: The technology in our markets is changing rapidly, Technological developments in our markets are rather
minor (reverse-coded), Technological changes provide big opportunities in our markets, It is very
difficult to forecast where the technologies in our
markets will be in the next five years, and A large
number of new products in our markets have been
made possible through technological breakthroughs. The scale for market turbulence (
.73) also draws on Jaworski and Kohli (1993), and it
comprises the following items: Customers in our
markets are very receptive to new product ideas,
In our markets, customers preferences change
relatively fast, New customers tend to have
product-related needs that are different from
those of existing customers, and We mainly
address the same customer base that we did in
the past (reverse-coded).
Control variables. Six sets of controls were included. Firm size may affect innovation and performance because larger firms usually have larger
knowledge bases. Therefore, I included the logarithm of firms overall annual revenues in millions
of euros in analyses. For the same reasons, I included R&D intensity, measured as R&D expenditures as a percentage of sales; this variable has been
used as a proxy for absorptive capacity in many
previous studies (Lane et al., 2006). Because of my
cross-industry approach, I controlled for any industry effects. In view of prior studies (e.g., Lichtenthaler, 2007) that have reported different knowledge
strategies in these industries, I examined firms
from the following three sectors: automotive/machinery, chemicals/pharmaceuticals, and semiconductors/electronics. For the latter two sectors, I included a dummy (1 pertaining to this industry;
0 not pertaining to this industry).
Moreover, I controlled for three organizational
variables (Lord & Ranft, 2000; Markides & Williamson, 1996). To capture prior technological knowledge, I considered a firms degree of technological
diversification ( .90). The scale is based on prior
research (Cesaroni, 2004), and it comprises the following items: Our technology portfolio comprises
technologies in many different technological areas, The important technologies of our business
units are very different, and We apply technological knowledge from completely different fields of
technology. To capture the extent of prior market
knowledge, I included a scale for a firms level of
product diversification ( .81). It was based on

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discussions in the literature (Cesaroni, 2004) and

includes the following items: Our product portfolio comprises a large number of different products,
The diversity of our product portfolio is high, and
We are active in various industrial areas. In addition, I included a scale for the degree of international
diversification ( .87), with the following items: A
large part of our companys sales are generated
abroad, We have affiliates in a large number of
countries, and The international business is very
important for our firm. Thus, the scale captures the
number and importance of a firms foreign subsidiaries (Inkpen & Dinur, 1998; Lord & Ranft, 2000).

Analytical Procedures
In analyses, structural equation modeling (SEM)
based on the AMOS 16 software package was used.
To minimize potential interpretational confounding, I established the validity of the measurement
model before testing the structural model (Hair
et al., 2006). Going beyond chi-square statistics,
overall fit measures evaluate how well a model
reproduces the observed variables covariance matrix. For the goodness-of-fit index (GFI) and the
adjusted goodness-of-fit index (AGFI), a minimum
value of .9 is considered acceptable. For the rootmean-square error of approximation (RMSEA), values of up to .08 are regarded as acceptable (Bagozzi
& Yi, 1988). Given that the estimation methods are
based on asymptotic theory, the number of observations has to exceed the number of parameters to
be estimated by at least 50 (Bagozzi & Yi, 1988).
Although all of my models fulfilled this minimum
requirement, I calculated additional models using
parcels to reduce the number of free parameters.
Thus, I followed prior work (Hoegl & Gemuenden,
2001) and aggregated the scales of innovation, performance, and of the six learning processes by calculating the arithmetic means and treating them as
observed indicators. These additional models show
no significant changes in the findings.
To examine complementarity, it was inappropriate to use pairwise interaction because it would not
have addressed multilateral interactions between
the three learning processes (Whittington et al.,
1999). Instead, it was paramount to compare the
effects of the individual variables with the overall
effect (Tanriverdi & Venkatraman, 2005). Complementarity of the learning processes would imply
that the magnitude of the effect of overall absorptive capacity was larger than the sum of the marginal effects from pursuing each process individually. When analyzed together, the individual effects
should be exhausted by the overall effect (Whitting-

ton et al., 1999). Therefore, I relied on higher-order

factor modeling (Hair et al., 2006) and additional
three-way interaction analyses (Cohen, Cohen, West,
& Aiken, 2003). These procedures are consistent with
recent examinations of complementarity. For instance, Tanriverdi and Venkatraman (2005) relied on
higher-order factor modeling, whereas Wiklund and
Shepherd (2005) used three-way interactions.
To analyze interaction effects, moderated multiple regression analyses were used with the constructs arithmetic means. Technological and market turbulence were quasi moderators because they
had significant bivariate correlations with some of
the dependent variables (Sharma, Durand, & GurArie, 1981). If a search for moderators is guided by
theory based on a conceptual framework, these
analyses may include quasi moderators (Sharma et
al., 1981). To reduce multicollinearity, I used mean
centering and only considered one interaction term
per model (Cohen et al., 2003). The regression coefficient and the partial F associated with the
change in R2 that resulted from adding the interaction term were analyzed to test whether or not an
interaction effect existed. To examine the form of
the interaction, I analyzed simple slopes at one
standard deviation below and above the moderators mean and ensured the significance of the coefficients at both levels (Cohen et al., 2003). These
procedures showed positive interactions for all
significant regression coefficients. An equivalent
method with a three-way interaction was used to
examine the complementarity of the learning processes (Cohen et al., 2003).
For all models, I calculated the variance inflation
factor (VIF) to check for potential multicollinearity.
The highest VIF found, 2.69, for the interaction
term of exploratory and transformative learning in
models A10 and B10, was well within an acceptable range (Hair et al., 2006). Following prior work
(Cassiman & Veugelers, 2006), I additionally estimated Heckman selection models (Greene, 2007).
Specifically, I examined the effect of absorptive
capacity while considering different degrees of
technology orientation (Zheng, Yim, & Tse, 2005).
Finally, I calculated two-stage least squares regressions to account for potential cross-sectional influences between absorptive capacity, innovation, and
performance (Greene, 2007). Moreover, Whites
general test did not reveal evidence of heteroskedasticity in the cross-sectional data (Greene, 2007).
The results of these additional analyses are consistent with the findings that are reported below, and
they point neither to sample bias nor to significant
cross-sectional influences.

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RESULTS
Measurement Model
To examine the dimensionality, convergent validity, and discriminant validity of the absorptive
capacity measure, I conducted confirmatory factor
analyses (Hair et al., 2006). First, the six individual
constructs were assessed. Each item was allowed to
load only on the factor for which it was a proposed
indicator. Second, I compared several alternative
measurement models representing plausible specifications for the relationships between the variables. Model 1 has a unidimensional first-order
factor that accounts for the variance among all 25
items. Model 2 has the 25 items forming six correlated first-order factors. In model 3, the items form
six first-order factors, which form three correlated
higher-order factors (exploratory, transformative,
and exploitative learning). Model 4 has the six firstorder factors form two correlated higher-order factors.
The first comprises recognize, assimilate, and maintain, whereas the second includes reactivate, transmute, and apply. Model 5 posits absorptive capacity
as a higher-order factor that accounts for the relationships between the three learning processes.
Comparison of model 1 (2 1,627.46, df 275)
and model 2 (2 670.96, df 260) shows that
model 2 is the better-fitting model because it has a
lower chi-square relative to the degrees of freedom.
Thus, the six dimensions underlying the three
learning processes are not only theoretically, but
also empirically, distinguishable, and this provides
support for the multidimensionality of absorptive
capacity. Moreover, I examined additional models
that are similar to model 2 because they have the 25
items form two, three, four, or five correlated firstorder factors. As model 2 exhibited better fit than
these additional models, they were not examined
in further detail. A model of six first-order factors
reflecting the critical activities of absorptive capacity was superior to a model of three first-order
factors representing the three learning processes
and to a model of two first-order factors capturing
potential and realized absorptive capacity. Thus,
my results are consistent with earlier findings
(Jansen et al., 2005; Matusik & Heeley, 2005) because they point to the distinct character of the
process stages of absorptive capacity.
In model 2, the paths from the items to the factors
are all highly significant (p .001), providing support for convergent validity. Another model, in
which the factors were not allowed to correlate,
provided poorer fit, indicating that pairs of correlations among the first-order factors significantly
differed from zero. They were also below the cut-off
value of .90, demonstrating the distinctiveness of

the content captured by the first-order factors. The

items convergence on their factors and the factors
distinctness provided support for discriminant validity (Bagozzi & Yi, 1988). Further comparisons
showed that model 3 (2 590.15, df 267) was
superior to model 2 and model 4 (2 703.15, df
269). Moreover, all second-order factor loadings
were highly significant (p .001), providing further justification for model 3. A model with three
higher-order factors (exploratory, transformative, and
exploitative learning) was superior to models without
higher-order factors and to a model with two higherorder factors, which might reflect potential and realized absorptive capacity. Two additional models, in
which the factors of model 3 and model 4 were not
allowed to correlate, provided a poorer fit.
Finally, model 5 was superior to model 3. To test
for absorptive capacity as a higher-order factor, it is
inappropriate to compare the change in chi-square
relative to the change in degrees of freedom (Tanriverdi & Venkatraman, 2005). Instead, I calculated
the target coefficient, which is the ratio of the chisquare value of the lower-order factor model to the
chi-square value of the higher-order factor model.
This coefficient was also calculated to provide evidence for the three second-order factors. Support
for a higher-order factor becomes stronger as this
coefficient approaches 1.0, and values above .90
indicate that the higher-order model effectively explains the intercorrelations between the lower-order factors (Marsh & Hocevar, 1985). The target
coefficient of .94 showed that absorptive capacity
accounted for 94 percent of the relations among the
three learning processes. Moreover, all factor loadings were highly significant (p .001). Thus, a
model with absorptive capacity as a higher-order
factor was superior to models without this factor.
To further assess construct validity, I compared
the scores of the six first-order factors with separate
measures for each learning process and absorptive
capacity. Four additional two-item constructs were
included in the questionnaire to reflect the higherorder constructs and to ensure that the constructs
with two first-order factors could be identified
(Rindskopf & Rose, 1988). The correlations between
the first-order factors and the measures of the respective learning processes were significant and
positive. Moreover, all six first-order factors had a
significant, positive correlation with the overall
measure of absorptive capacity. Altogether, the
findings support the multidimensionality, convergent validity, and discriminant validity of a higherorder absorptive capacity construct that comprises
the three learning processes.

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21.

20.

* p .05
** p .01
*** p .001

Innovation
Performance
Firm size
R&D intensity
Chemicals/
pharmaceuticals
Electronics/
semiconductors
Technological
diversification
Product
diversification
International
diversification
Technological
turbulence
Market
turbulence
Recognize
Assimilate
Maintain
Reactivate
Transmute
Apply
Exploratory
learning
Transformative
learning
Exploitative
learning
Absorptive
capacity

4.66

4.83

4.71

4.93
3.87
4.63
4.80
4.88
4.78
4.46

3.79

4.23

5.41

4.70

4.34

0.33

4.77
4.70
6.63
6.90
0.33

0.91 1.72

0.97 1.25

1.01 1.25

1.00
1.00
1.25
1.00
1.00
1.00
1.00

0.98 1.25

0.91 1.60

1.53 1.00

1.58 1.33

1.55 1.00

1.37
1.22
1.20
1.15
1.03
1.14
1.11

6.52

7.00

7.00

7.00
6.25
7.00
7.00
7.00
7.00
6.67

6.25

7.00

7.00

7.00

7.00

1.00

.53***

.55***

.47***

.38***
.19*
.44***
.36***
.46***
.53***
.35***

.22**

.26**

.32***

.26***

.33***

.07

.32***

.32***

.24**

.23**
.19*
.22**
.20**
.25**
.34***
.25**

.18*

.18*

.42***

.37***

.28***

.00

.30***

.24**

.18*

.34***
.19*
.28***
.02
.14*
.29***
.33***

.27***

.36***

.42***

.21**

.35***

.08

1.33 7.00
1.75 7.00
.54***
2.29 11.93
.17*
.31***
0.02 0.28
.08
.07
.15
0.00 1.00 .12
.11
.03

0.47 0.00

1.12
1.12
2.05
9.74
0.47

Mean s.d. Min. Max.

.02

.01

.03

.09
.00
.03
.07
.01
.02
.15

.07

.03

.10

.03
.11
.09
.08
.04
.02
.07

.24**

.20**
.18*
.22**
.10
.12
.15*
.21**

.19*
.16

.22**

.09
.06
.01
.18*
.11
.05
.09

.11
.04
.09

.45***

.59***

.55***

.05

.20**

.13 .07
.00

.03

.06 .07

.08

.03

.01

.02

.11

.06

.08

.06 .46***

.14

.08
.16*
.04
.06
.04
.01
.13

.10

.19*
.08
.19*
.07
.16*
.26**
.17*

.14

.33*** .38***

.52***

D
E
CT

19.

12.
13.
14.
15.
16.
17.
18.

11.

10.

9.

8.

7.

6.

1.
2.
3.
4.
5.

Variables

R
A
R
ET
.17*
.19*
.29***
.03
.21**
.30***
.21**

.39***

10

.06

.18*

.22**

.23**

.15*

.10

.26*** .22**

.28*** .24**

.19*

T
R
A
.14

.13
.27***
.12
.05
.22**
.22**
.22**

11

TABLE 2
Descriptive Statistics and Pearson Correlations

.32***
.15
.17*
.28***
.79***

.62***
.53***
.44***
.59***
.55***
.89***

15

16

17

.54***
.49*** .56***
.49*** .53*** .61***
.52*** .49*** .50*** .51***

14

18

.57*** .66*** .89*** .88*** .57*** .72***

19

20

.86*** .53*** .74*** .75*** .78*** .78*** .85*** .87*** .87***

.65*** .25**

.65*** .27*** .87*** .86*** .66*** .62*** .59***

13

12

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FIGURE 1
Effects of Learning Processes: The Complementarity Model
x1
x2
x3

Recognize

.96***

x4
Exploratory
learning

x5
x6
x7

.62***
Assimilate

x8
.79***

x9

y1

x10
x11
x12

Maintain

Transformative
learning

x13
x14

D
E
CT

.96***

x18

x20
x21
x22

R
x23

x24

x25

Transmute

.84***

A
R
ET

Innovation

y2
y3

E
L
IC

Absorptive
capacity

y4

T
R
A
.39***

Reactivate

x17

x19

.95***

.78***

x15
x16

.65***

.71***

Performance

y5
y6

y7

Exploitative
learning

Apply

.85***

Hypothesis Tests
The descriptive statistics, presented in Table 2,
show a relatively high level of absorptive capacity
in many firms. The significant correlations between
the three learning processes are consistent with
complementarity theory (Milgrom & Roberts, 1995)
and with constructs in other fields, such as market
orientation (Jaworski & Kohli, 1993). Absorptive
capacity is positively related to innovation and performance, and it has significant and positive correlations with firm size and technological, product,
and international diversification. In particular,
technological diversification has a significant correlation with exploratory and transformative learning, whereas its correlation with exploitative learning is only marginally significant (.16, p .1).
Product diversification has an insignificant correlation with exploratory learning, a marginally sig-

***p < .001

nificant correlation with transformative learning

(.14, p .1), and a significant correlation with
exploitative learning. These correlations support
my arguments on prior technological and market
knowledge. Moreover, the insignificant correlation
between absorptive capacity and R&D intensity underscores their differences. Absorptive capacity is
not primarily determined by a firms R&D expenditures, and this provides support for distinguishing
technological and market knowledge.
To examine complementarity, I first used higherorder factor modeling and calculated two structural
models. In Figure 1, the higher-order factor absorptive capacity allows consideration of the complementarity of the learning processes because it explains why the lower-order factors coexist and
covary with one another (Hair et al., 2006). Following recent studies on related topics (e.g., Kale &

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FIGURE 2
Effects of Learning Processes: The Direct Effects Model
x1
x2
x3

Recognize

.96***

x4
Exploratory
learning

x5
x6
x7
x8

.61***

.02

Assimilate

x9

.73***

.10

x10
.78***

x11
x12

Maintain

x13

.70***

Reactivate
.42*

D
E
CT
.61***

x18
x19
x20
x21
x22

R
x23

x24
x25

.27

Transmute

E
L
IC
y4

T
R
A

Performance

x17

.84***

A
R
ET

y2
y3

.02

.78***

x15
x16

Innovation
.17

Transformative
learning

x14

y1

y5

y6
y7

Exploitative
learning

Apply

.84***

Singh, 2007; Tanriverdi & Venkatraman, 2005), the

directions of the structural links are from absorptive capacity to the learning processes, and they
take into account the significant correlations between the learning processes. The model in Figure
2 only includes the learning processes and models
their pairwise covariance. It suggests that the learning processes have direct effects on innovation and
performance, but it does not demonstrate any incremental explanatory power for their complementarity. In Figure 1, the structural links from absorptive capacity to innovation (.65, p .001) and to
firm performance (.39, p .001) are significant and
positive. In Figure 2, only the structural link from
exploitative learning to innovation is significant
(.42, p .05), whereas the other five relationships
are insignificant. Moreover, the model in Figure 1
has a satisfactory fit (2 761.17, df 453, GFI

*p < .05
***p < .001

.92, AGFI .91, RMSEA .07), whereas the model

in Figure 2 does not have a satisfactory fit (2
913.92, df 481, GFI .76, AGFI .72, RMSEA
.08).
To further examine complementarity, I relied on
three-way interaction analyses. Innovation is the
dependent variable in models A1A13, which are
summarized in Table 3, and performance is the
dependent variable in models B1B13, presented
in Table 4. Models A1 and B1 only include the
controls, and I entered the learning processes in
models A2 and B2, which show a highly significant
direct effect of exploitative learning and a significant direct effect of transformative learning on innovation. After introducing the two-way interactions in models A9 and B9, I added the three-way
interaction term in models A10 and B10, and it has
a positive and significant effect in both models.

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Moreover, the effect of absorptive capacity as a

higher-order construct is positive and significant in
models A11 and B11. These findings are consistent
with the structural equation models. The only difference is the significant direct effect of transformative learning on innovation, which can be explained by controlling for the size of a firms
knowledge base in the ordinary least squares (OLS)
analyses. Moreover, the results of additional analyses with the firms ROS measured in the same year
and with a one-year lag lead to consistent results.
These findings provide strong support for Hypothesis 4. The data show that the learning processes
have a major impact on innovation and performance through absorptive capacity.
In models A3A8 and B3B8 and A12A13 and
B12B13, the interaction terms provide consistent
findings. Technological and market turbulence do
not significantly affect the relationship between absorptive capacity and innovation. The three learning processes and overall absorptive capacity have
an equally positive effect on innovation at different
levels of turbulence. However, technological and
market turbulence moderate the effects of the individual learning processes and overall absorptive
capacity on performance. All interaction terms are
at least moderately significant. We conducted additional analyses with subsamples, which are not
shown in the tables. These analyses demonstrated
that the impact of the three-way interaction of the
learning processes is stronger in turbulent environments. Simple slope analyses show a positive moderating influence of the environmental variables.
Although the influence of the learning processes
and overall absorptive capacity is positive in all
environments, this influence becomes stronger in
highly turbulent settings. Figure 3 illustrates these
findings, and it shows that absorptive capacity has
a strong effect on performance in highly turbulent
markets, but the strength of this positive effect is
reduced in relatively stable environments. Additional analyses with ROS and ROS with a one-year
lag lead to consistent results. Regarding performance, the data therefore support the positive moderating influence of technological and market turbulence formulated in Hypotheses 1, 2, 3, and 5.

to the particular benefits of dynamic capabilities in

highly turbulent settings. Moreover, the positive
effect of absorptive capacity deepens researchers
understanding of interfirm discrepancies in profiting from external knowledge. This insight is particularly important in light of an increasing interest in
fundamental enablers and barriers to the successful
acquisition of external knowledge.
Theoretical Implications
The empirical study has major implications for
research into organizational learning, innovation,
complementarity, and environmental turbulence.
Concerning learning and innovation, this study extends prior work by showing that most firms do not
have a uniform level of all learning processes
(Jansen et al., 2005). For instance, some firms are
relatively inefficient at exploitative learning based
on limited market knowledge complementing prior
technological knowledge. These firms seem to focus excessively on searching for external knowledge, and they put insufficient emphasis on exploiting the acquired knowledge (Zahra & George,
2002). The distinction of technological and market
knowledge deepens understanding of different
types of experience in managing knowledge (Argote et al., 2003), and it helps to explain the variety
of findings in prior research, which has often focused either on exploratory or exploitative learning
in one specific environment (Lane et al., 2006). In
particular, several studies have relied on R&D intensity as the original proxy for absorptive capacity. As in some prior studies, however, R&D intensity does not have strong explanatory power in our
sample (Lane & Lubatkin, 1998; Mowery et al.,
1996). R&D intensity neglects essential parts of absorptive capacity because it focuses on technological knowledge, whereas the importance of market
knowledge is undervalued (March, 1991; Todorova
& Durisin, 2007). Thus, my findings underscore the
need for specific measures and for establishing
clear boundary conditions on the implications of
empirical absorptive capacity research.
Absorptive capacity has provided an explanation
for relying on internal R&D and accessing external
knowledge in alliances, and the three learning processes may further help to explain firms choices of
different types of technology alliances, such as exploration and exploitation alliances (Koza & Lewin,
1998). The level of the learning processes likely
determines which innovation activities a firm coordinates inside its boundaries. By emphasizing
the importance of absorptive capacity, the study
has provided support for capability-based perspectives in boundaries research, which go beyond ef-

D
E
CT

A
R
ET

DISCUSSION
The data supported the distinction of three learning processes within absorptive capacity (Lane et
al., 2006). Based on prior technological and market
knowledge, these processes are different sources of
superior innovation and performance. In particular, the present findings emphasize the complementarity of the learning processes, and they point

837

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R
A

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TABLE 3
Results of OLS Analyses with Innovation as the Dependent Variablea
Variables

Model A1
.01
.01
.18
.11
.13
.04
.11
.06
.16

Firm size
R&D intensity
Chemicals/pharmaceuticals
Electronics/semiconductors
Technological diversification
Product diversification
International diversification
Technological turbulenceb
Market turbulenceb

(.05)
(.01)
(.23)
(.24)
(.09)
(.08)
(.08)
(.12)
(.11)

Exploratory learningb
Transformative learningb
Exploitative learningb

Model A2
.04
.01
.27
.21
.12
.13
.03
.08
.10

.04
.01
.27
.22
.12
.13
.03
.09
.11

.04
.01
.27
.22
.12
.13
.03
.08
.11

(.05)
(.01)
(.20)
(.21)
(.07)
(.07)
(.07)
(.10)
(.09)

.03
(.11)
.21* (.12)
.47*** (.13)

Model A5
.04
.01
.27
.19
.12
.13
.03
.07
.10

.18
.12
2.83**

.44
.38
7.17***

(.05)
(.01)
(.20)
(.21)
(.07)
(.07)
(.07)
(.10)
(.09)

.03
(.11)
.20
(.13)
.47*** (.13)

(.09)
(.08)
.06

Absorptive capacity technological turbulence

Absorptive capacity market turbulence

A
R
T

Model A4

.04

D
E
CT

Absorptive capacityb

(.05)
(.01)
(.20)
(.21)
(.07)
(.07)
(.07)
(.10)
(.09)

.03
(.11)
.22* (.12)
.47*** (.13)
.07

Exploratory learning transformative learning

Exploratory learning exploitative learning
Transformative learning exploitative learning
Exploratory transformative exploitative

RE

(.05)
(.01)
(.20)
(.20)
(.08)
(.07)
(.07)
(.10)
(.09)

.03
(.11)
.21* (.12)
.46*** (.13)

Exploratory learning technological turbulence

Exploratory learning market turbulence
Transformative learning technological
turbulence
Transformative learning market turbulence
Exploitative learning technological
turbulence
Exploitative learning market turbulence

R2
Adjusted R2
F

Model A3

(.08)

E
L
IC

T
R
A
.44
.37
6.64***

.44
.37
6.60***

.44
.37
6.64***

Unstandardized coefficients are given, with standard errors in parentheses. n 175.

Mean-centered.

p .10
* p .05
** p .01
*** p .001

ficiency-based analyses such as transaction costs

studies (Santos & Eisenhardt, 2005). Thus, the
learning processes may help to explain the use of
different innovation strategies within and across
industries (Powell, Koput, & Smith-Doerr, 1996). In
this respect, this study underscores the need to
further examine the relationships of internal and
external exploratory, transformative, and exploitative learning, because prior research is relatively
limited in scope, chiefly examining only internal
and external knowledge exploration (Cassiman &
Veugelers, 2006). It is essential to analyze whether
the development of absorptive capacity crowds out
internal innovation capabilities, which are critical,
despite increasing external knowledge acquisition

(Laursen & Salter, 2006). In addition, there may be

decreasing marginal returns in developing the three
learning processes, and they call for balancing absorptive capacity and internal innovation
capabilities.
Regarding the complementarity of the three
learning processes (Song et al., 2005), the present
data show strong complementary effects. The finding that only exploitative learning has a significant
direct effect illustrates that profits are primarily
generated in exploitation processes (Zahra &
George, 2002). The other direct effects lack of significance suggests that the likelihood of compensating for limitations in one learning process by
excelling at the other processes is low. Accord-

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TABLE 3
Continued
Model A6
.04
.01
.27
.20
.12
.13
.03
.08
.11

(.05)
(.01)
(.20)
(.21)
(.07)
(.07)
(.07)
(.10)
(.09)

.03
(.11)
.21* (.12)
.46*** (.13)

.04

Model A7
.04
.01
.27
.21
.12
.13
.03
.08
.11

(.05)
(.01)
(.20)
(.21)
(.07)
(.07)
(.07)
(.10)
(.09)

.02
(.11)
.21* (.12)
.47*** (.13)

Model A8
.04
.01
.26
.21
.12
.13
.03
.07
.10

(.05)
(.01)
(.20)
(.21)
(.07)
(.07)
(.07)
(.11)
(.09)

.03
(.11)
.21* (.13)
.47*** (.13)

Model A9
.03
.01
.25
.23
.12
.13
.03
.07
.11

.02
(.11)
.23* (.13)
.38** (.13)

.03
.01
.28
.22
.12
.12
.03
.06
.11

Model A11

(.05)
(.01)
(.20)
(.20)
(.07)
(.07)
(.07)
(.10)
(.09)

.06
.01
.26
.23
.11
.08
.07
.03
.10

(.05)
(.01)
(.20)
(.21)
(.08)
(.07)
(.07)
(.10)
(.09)

Model A12
.07
.01
.26
.23
.11
.08
.07
.04
.11

(.08)
.09
.02
.15

RE

.44
.37
6.60***

.11
.06
.21
.22*

D
E
CT

A
R
T

.44
.37
6.62***

(.13)
(.10)
(.08)

.45
.38
6.13***

ingly, these findings underline the need to break new

ground, because independent analyses of learning
processes may lead to inconsistent results (Lane et al.,
2006). If I had examined each single learning process,
I might have incorrectly concluded that they do not
have significant effects, even though they contribute
to innovation and performance through absorptive
capacity. By modeling their complementarity, I discovered synergies resulting from their coexistence,
and their positive correlations suggest that many
firms attempt to achieve these synergies. As imitating
a single learning process often is not beneficial, their
complementarity is a major reason why absorptive
capacity is a source of competitive advantage (Zahra
& George, 2002).
Concerning environmental turbulence, absorptive capacity has an equally positive effect on innovation in settings characterized by different levels of turbulence. However, technological and

.08
.01
.26
.23
.11
.08
.07
.03
.10

(.05)
(.01)
(.20)
(.21)
(.08)
(.07)
(.07)
(.11)
(.09)

E
L
IC

(.08)
.04

(.05)
(.01)
(.20)
(.21)
(.08)
(.07)
(.07)
(.11)
(.09)

Model A13

.02
(.12)
.27* (.13)
.41** (.14)

(.08)
.05

.44
.37
6.60***

(.05)
(.01)
(.20)
(.20)
(.07)
(.07)
(.07)
(.10)
(.09)

Model A10

.48
.42
6.34***

T
R
A

(.14)
(.11)
(.10)
(.08)

.57*** (.09)

.57*** (.09)
.03

.57*** (.09)

(.08)
.01

.40
.35
7.45***

.40
.34
6.78***

(.08)

.40
.34
6.76***

market turbulence positively moderate its impact

on performance. Thus, these findings underscore
the particular importance of dynamic capabilities
under turbulent conditions (Teece, 2007). In relatively stable settings, absorptive capacity is critical
to innovation, but the positive performance effects
are limited. In these settings, a firm has many other
possible means to enhance its performance, and competitors are in a better position to emulate the firms
absorptive capacity (Helfat et al., 2007). My finding
that the positive effect of exploitative learning becomes stronger in turbulent environments contrasts
with prior research into internal innovation, which
has shown negative effects of exploitative learning
under turbulent conditions (Jansen et al., 2006). In the
context of absorptive capacity, however, the danger of
organizational inertia is limited (Leonard-Barton,
1992). Moreover, most firms balance the development of exploratory and exploitative learning, and

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TABLE 4
Results of OLS Analyses with Performance as the Dependent Variablea
Variables

Model B1

Firm size
R&D intensity
Chemicals/pharmaceuticals
Electronics/semiconductors
Technological diversification
Product diversification
International diversification
Technological turbulenceb
Market turbulenceb

.09*
.01
.23
.13
.05
.17*
.20*
.08
.13

(.05)
(.01)
(.22)
(.23)
(.08)
(.07)
(.08)
(.11)
(.10)

Exploratory learningb
Transformative learningb
Exploitative learningb

Model B2

.07
.01
.28
.07
.05
.21*
.16*
.16
.11

(.05)
(.01)
(.22)
(.22)
(.08)
(.07)
(.08)
(.11)
(.10)

.07
.01
.28
.05
.05
.22*
.15*
.14
.11

(.05)
(.01)
(.21)
(.22)
(.08)
(.07)
(.08)
(.11)
(.10)

.08
.01
.27
.08
.05
.21*
.16*
.15
.10

(.05)
(.01)
(.22)
(.23)
(.08)
(.07)
(.08)
(.11)
(.10)

.02
.08
.26*

(.12)
(.14)
(.14)

.02
.08
.27*

(.12)
(.14)
(.14)

.04
.08
.27*

(.12)
(.14)
(.14)

.02
.09
.25*

(.12)
(.14)
(.14)

.18*

(.09)
.15*

(.09)
.13

(.08)

D
E
CT

Absorptive capacity technological turbulence

Absorptive capacity market turbulence

A
R
T

RE

.26
.20
4.47***

Model B5

(.05)
(.01)
(.22)
(.22)
(.08)
(.07)
(.08)
(.11)
(.10)

Exploratory learning transformative learning

Exploratory learning exploitative learning
Transformative learning exploitative learning
Exploratory transformative exploitative

R2
Adjusted R2
F

Model B4

.08
.01
.28
.09
.05
.21*
.16*
.14
.10

Exploratory learning technological turbulence

Exploratory learning market turbulence
Transformative learning technological
turbulence
Transformative learning market turbulence
Exploitative learning technological
turbulence
Exploitative learning market turbulence

Absorptive capacityb

Model B3

.31
.25
4.41***

E
L
IC

T
R
A
.34
.28
4.67***

.34
.29
4.71***

.33
.27
4.31***

Unstandardized coefficients are given, with standard errors in parentheses. n 175.

Mean-centered.

p .10
* p .05
** p .01
*** p .001

doing so limits the potentially negative effects of exploitative learning in turbulent environments. As exploitative learning is essential for capturing value
from external knowledge, it is particularly important
in turbulent environments (Zahra & George, 2002).
Managerial Implications
Exploratory, transformative, and exploitative
learning have complementary positive effects on
profiting from external knowledge. Thus, an increase in one learning process may not have a positive effect independent of the other processes.
Firms need the ability to assimilate, maintain, and
apply external knowledge, and an excessive focus

on one learning process likely has negative consequences (Lane et al., 2006; Zahra & George, 2002).
By contrast, a balanced development of the learning processes positively affects innovation and performance in stable and dynamic environments. For
a firms competitors, it is challenging to imitate
three complementary learning processes, which are
less obvious than an individual process (Song et al.,
2005). Thus, the complementarity of the learning
processes emphasizes the opportunities of gaining
and sustaining a competitive advantage by developing absorptive capacity.
To actively develop the learning processes, firms
need sufficient market knowledge in addition to
prior technological knowledge (Cohen & Levinthal,

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TABLE 4
Continued
Model B6

Model B7

Model B8

Model B9

Model B10

Model B11

.08
.01
.27
.08
.04
.21*
.16*
.13
.09

(.05)
(.01)
(.21)
(.22)
(.08)
(.07)
(.08)
(.11)
(.10)

.07
.01
.27
.08
.04
.21*
.16*
.15
.11

(.05)
(.01)
(.22)
(.22)
(.08)
(.07)
(.08)
(.11)
(.10)

.07
.01
.25
.09
.05
.21*
.16*
.12
.09

(.05)
(.01)
(.22)
(.22)
(.08)
(.07)
(.08)
(.11)
(.10)

.08
.01
.27
.08
.05
.21*
.16*
.13
.09

(.05)
(.01)
(.22)
(.23)
(.08)
(.08)
(.08)
(.12)
(.10)

.08
.01
.28
.09
.05
.20*
.16*
.13
.10

(.05)
(.01)
(.22)
(.23)
(.08)
(.08)
(.08)
(.12)
(.10)

.02
.08
.26*

(.12)
(.14)
(.14)

.01
.07
.27*

(.12)
(.14)
(.14)

.02
.06
.28*

(.12)
(.14)
(.14)

.01
.09
.23

(.12)
(.14)
(.15)

.03
.12
.25

(.13)
(.15)
(.15)

.19*

(.07)
.11

(.08)
.19*

(.10)
.07
.00
.07

.33
.27
4.24***

.34
.28
4.69***

.09
.03
.11
.15*

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.34
.28
4.73***

(.15)
(.12)
(.09)

.33
.23
3.49***

1990). Otherwise, a firm may successfully assimilate external knowledge, but it likely will have
deficits in exploiting the assimilated knowledge
(Zahra & George, 2002). Although prior technological knowledge is a necessary condition for absorptive capacity, it seems to be insufficient for enhancing all learning processes. Beyond partner-specific
knowledge (Dyer & Singh, 1998; Lane & Lubatkin,
1998), market knowledge constitutes an essential
complement to prior technological knowledge
(Song et al., 2005). Thus, a firm needs to thoroughly
balance the development of technological and market knowledge in different fields to enhance the
learning processes (Holmqvist, 2004).
Limitations and Outlook
A few limitations of this study are worth noting.
First, the sample consists of medium-sized and

.36
.27
4.27***

.07
.01
.27
.08
.06
.19**
.18*
.12
.10

(.05)
(.01)
(.21)
(.22)
(.08)
(.07)
(.08)
(.11)
(.10)

Model B12
.06
.01
.27
.06
.05
.19**
.18*
.14
.11

(.05)
(.01)
(.21)
(.22)
(.08)
(.07)
(.08)
(.11)
(.10)

Model B13
.05
.01
.26
.05
.06
.19**
.18*
.10
.10

(.05)
(.01)
(.21)
(.22)
(.08)
(.07)
(.08)
(.11)
(.10)

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(.15)
(.12)
(.11)
(.09)

.28** (.10)

.30** (.10)
.11

.28** (.10)

(.09)
.14*

.31
.25
5.14***

.33
.27
4.81***

(.09)

.34
.28
4.94***

large industrial firms that acquire external technological knowledge. Therefore, the results may not
directly be transferable to small firms whose technological and market knowledge is often relatively
limited because of lower absolute R&D expenditures and limited product diversification. Accordingly, I encourage future studies to investigate
small firms managerial challenges in the three
learning processes. Second, the descriptive findings reflect the current situation in Germany. Thus,
it would be worthwhile to conduct a similar study
in the United States because some U.S. firms are
leading in actively acquiring external knowledge
(Huston & Sakkab, 2006). Third, further studies
may address the costs of capability development
and examine potentially declining marginal returns
to the learning processes (Helfat et al., 2007).
Fourth, the data are cross-sectional, apart from the
one-year-lagged ROS data. Future studies might

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FIGURE 3
Illustration of Simple Slope Analysis

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also use multiple data sources to limit common

method bias, and they might additionally apply
longitudinal research designs.
Finally, this study has focused on the consequences of absorptive capacity. Thus, additional
studies into the antecedents of the complementary
learning processes are needed. These studies may
help to identify sources of technological and market knowledge, and they may further enhance the
measurement scales. Moreover, I suggest dyadic
analyses that examine partner-specific characteristics of the learning processes. In addition, the
notion of desorptive capacity in outward knowledge transfer deserves further attention (Lichtenthaler, Ernst, & Lichtenthaler, 2005). Here, the
distinction between technological and market
knowledge may deepen understanding of knowledge overlap between alliance partners (Nooteboom, Vanhaverbeke, Duysters, Gilsing, & van den
Oord, 2007). The current analyses indicate that the
complementary learning processes of absorptive
capacity necessitate further research to offer a better understanding to firms seeking to profit from
external knowledge.

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APPENDIX

Scale Items

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Exploratory Learning

Recognize ( .96)
x1: We frequently scan the environment for new
technologies.
x2: We thoroughly observe technological trends.
x3: We observe in detail external sources of new
technologies.
x4: We thoroughly collect industry information.
x5: We have information on the state-of-the-art of external technologies.

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Teece, D. J. 2007. Explicating dynamic capabilities: The

nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal,
28: 1319 1350.

Zahra, S. A., & George, G. 2002. Absorptive capacity: A

review, reconceptualization, and extension. Academy of Management Review, 27: 185203.

Assimilate ( .81)
x6: We frequently acquire technologies from external
sources.
x7: We periodically organize special meetings with external partners to acquire new technologies.
x8: Employees regularly approach external institutions to
acquire technological knowledge.
x9: We often transfer technological knowledge to our
firm in response to technology acquisition opportunities.
Transformative Learning
Maintain ( .87)
x10: We thoroughly maintain relevant knowledge over
time.
x11: Employees store technological knowledge for future
reference.
x12: We communicate relevant knowledge across the
units of our firm.
x13: Knowledge management is functioning well in our
company.
Reactivate ( .89)
x14: When recognizing a business opportunity, we can
quickly rely on our existing knowledge.

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x15: We are proficient in reactivating existing knowledge

for new uses.
x16: We quickly analyze and interpret changing market
demands for our technologies.
x17: New opportunities to serve our customers with existing technologies are quickly understood.

August

x22: We regularly apply technologies in new products.

x23: We constantly consider how to better exploit
technologies.
x24: We easily implement technologies in new products.
x25: It is well known who can best exploit new technologies inside our firm.

Exploitative Learning
Transmute ( .86)
x18: We are proficient in transforming technological
knowledge into new products.
x19: We regularly match new technologies with ideas for
new products.
x20: We quickly recognize the usefulness of new technological knowledge for existing knowledge.
x21: Our employees are capable of sharing their expertise
to develop new products.

Ulrich Lichtenthaler (lichtenthaler@whu.edu) is an assistant professor of technology and innovation management at WHUOtto Beisheim School of Management,
where he also received his Ph.D. His current research
interests include absorptive and desorptive capacity, dynamic capabilities, open innovation, technology licensing, and interorganizational alliances.

Apply ( .86)

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