How Absorptive Capacity is Formed? : Not Explicit but Tacit Knowledge Matters

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Chung, Moon Young
Lee, Keun
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While the literature tend to use in-house R&D as a proxy for absorption capacity and be silent about where this ability of doing R&D has come from, this paper has tried to dig out the origin of absorption capacity after defining it first as being able to conduct one s own in-house R&D and second as being thereby able to generate innovation outcomes. This paper distinguish three forms of foreign technology acquisitions based on the unique archive data from Korea, such as know-how only licensing, know-how plus patent licensing, and patent only licensing. This data show that the majority of the Korean firms started with know-how only licensing, while licensing involving patents came later. Then, an econometric analysis finds that know-how licensing associated with imported capital facility has led to firms to start their own in-house R&D, whereas licensing involving patents only tend not to be significantly related to conducting R&D, which suggests possibly substituting effect between foreign patent introduction and doing own R&D. A similar econometric exercise shows that conducting own in-house R&D as well as licensing of know-how has led the firms to be able to generate innovations or patent applications at later stages. This study shows that before firms being able to do in-house R&D and innovations, there waslearning process involving foreign technology, especially tacit knowledge in the form of know-how, which is the origin of the absorptive capacity
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