Globalizing Domestic Absorptive Capacities

Promising innovation impulses originate increasingly from customers, suppliers or competitors outside of a firm’s traditional home market. We investigate how firms can adjust their absorptive capacities to benefit from these new opportunities. We suggest that these capabilities depend upon the investments in absorptive capacity development, international experience as well as the munificence of the home market environment. We test these hypotheses empirically based on a survey of more than 2,200 German firms. We find that the globalization of absorptive capacities is a combination of refining their development (most importantly through ambitious incentive systems), export experience and shortcomings of the domestic innovation environment. The importance of each individual factor varies with regards to the source of the impulse, i.e. whether it stems from foreign customers, suppliers or competitors.