ABSORPTIVE CAPACITY

Absorptive Capacity or ACAP as it is widely known as is a “less- heard” term. This is because the definition of ACAP and the measurements are still a matter of arguments for most of the researchers. Organizations view ACAP from different perspectives but what remains a matter of discussion is the true meaning of ACAP and its value addition to the organization.

CAP is an organization's capability (or set of capabilities) required to manage knowledge for the purpose of value creation. These capabilities involve the abilities to acquire, assimilate, convert, and exploit knowledge. It also highlights value creation as the dependent variable or outcome of ACAP, which can help explain a firm's motivation to develop and maintain these capabilities. Now the question comes, how to measure ACAP? The measurement is quite simple, you have a potential ACAP and then you have a Realized ACAP.

Potential ACAP makes the firm receptive to acquire and assimilate external knowledge developed elsewhere. It corresponds to the ability to value and acquire external knowledge but does not necessarily guarantee the successful exploitation of this knowledge. The ability to acquire is a function of three factors: experience, assimilation and effort Realized ACAP centers on converting and exploiting the same knowledge.

PACAP * h = RACAP; where PACAP >= RACAP, h is the efficiency factor, and h<= 1
The efficiency factor denotes the difference between potential and realized capacities.
Interesting?? Keep reading, I will continue on APAC in the next posting….