26 Apr 2011Working Paper Summaries

The Contingent Effect of Absorptive Capacity: An Open Innovation Analysis

by Andrew A. King and Karim R. Lakhani

Does experience with adopting technology improve a person's capacity for inventing better technology? On the other hand, does invention experience increase the capacity for adoption? This paper explores how adoption and invention affect each other, using data from several programming competitions sponsored by The MathWorks Corporation. Research was conducted by Andrew A. King of the Tuck School of Business at Dartmouth College and Karim R. Lakhani at Harvard Business School. Key concepts include:

"Absorptive capacity," a term coined in the late twentieth century, refers to the general ability to recognize the value of new information, choose what to adopt, and apply it to innovation.
In general, both invention and adoption experience will increase invention capacity and adoption capacity. The effect of adoption experience on invention capacity is especially dramatic; adoption provides alternative ideas that spark new ones.
However, inventors with a great deal of prior invention experience have an especially hard time suddenly switching to a new design path, even if that's what the project requires. The researchers believe this is because such inventors are saddled with both their old ideas and their recent ones, and thus need more time to warm up to brand new ideas mid-stream.

Author Abstract

Technological advancement and innovation requires the integration of both external knowledge and internal inventiveness. In this paper, we unpack the concept of absorptive capacity and separately explore the effect of different types of prior experience on the capacity to adopt external knowledge and make internal inventions. We also measure how absorptive capacity is influenced by changes in design "paths". We investigate nine open source programming contests in which 875 software programmers submit over 4.7 million lines of code. We conduct our analysis at the individual level and identify how programmers gain the ability to adopt and invent valuable code. Our evidence both confirms the theory of absorptive capacity and suggests refinements to it. We find that prior experience with both adoption and invention can indeed improve the capacity to adopt and invent valuable code, but we find that experience with adoption has the largest effect on invention capacity. We also find that major changes in the design "path" both advance and impede absorptive capacity. Changes in path allow rapid experience with alternative ideas, and this eventually aids adoption and invention capacity. However, these changes temporarily harm the ability of programmers to create valuable inventions. We discuss the implications of our findings for the literature on absorptive capacity and open and distributed innovation.