Abstract

Cohen and Levinthal (1990, p.128) define the firm’s absorptive capacity as “the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends.” Nooteboom et al. (2007) asserts that the ability of firms to benefit from external information depends on the cognitive distance between the firm and the actor providing new information or resources. A low cognitive distance makes it easy to understand each other, but such actors may not provide very novel information compared to what the firm already knows. In contrast, a high cognitive distance makes communication difficult, but increases the likelihood of receiving novel information. This paper look at how firms develop new or radically improved products and services by examining the interplay between internal and external knowledge sources over the life course of high performing R&D projects.

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