Cooperation resources, absorptive capacity and firm-level innovation

This thesis addresses how firms learn to innovate by using external information and knowledge in the face of limited absorptive capacity. Innovation is an interactive process that requires firms to reach beyond their boundary in search of external knowledge. However, very little is known about this process in developing countries. Using data from a developing country, Nigeria, I provide fresh evidence to the effect that interactive learning generally helps firm-level innovation. However, the positive relationship is contingent upon a firm's current level of innovativeness. As firms become more innovative, it seems less useful for them to rely on a broad spectrum of external sources. Going beyond the limits of the empirical analyses, a new agent based model (ABM) is developed to shed more light on the relationship between interactive learning, absorptive capacity and innovation. Following the notion that networks are a basic infrastructure for knowledge diffusion, the ABM analyses the role of absorptive capacity in the evolution and benefits of innovation networks under different knowledge regimes. Social capital is de-emphasised and firms ally purely for knowledge sharing. Absorptive capacity, which is itself influenced by cognitive distance, drives partner selection. ...