A Literature Review on Absorptive Capacity

Abstract
This paper reviews the developed body of literature on absorptive capacity over the last two decades. It identifies and discusses the main research streams and argues the tensions in the literature originate from the use of expense in R&D as a means of developing AC. Following from that, and building on the recent developments in literature, I argue that research in this area are needed and that the focus of research has to be aligned again to the Cohen and Levinthal’s 1989 and 1990 papers that discuss the general commercial application of acquired knowledge. This study, therefore, contributes to the understanding of absorptive capacity's antecedents and outcomes by offering important recommendations for policy makers and firms’ management.

Introduction
Nowadays, internal research and development (R&D) are integrated with knowledge sources external to the firm through licensing, company acquisition, R&D outsourcing, or the hiring of qualified researchers with relevant knowledge. This simultaneous internal and external knowledge acquisition activities prompt that these two activities are complementary. This recall the notion of “absorptive capacity”.
The motivation on choose the topic of absorptive capacity (AC) is due to the large use of it by researchers to explain various organizational phenomena. In addition, according to the focus of the course on developing and emerging economies, AC can act as a valuable complement to the traditional set of policy interventions aiming at enhancing the innovation performance of catching up economies. Indeed, since firms' AC relates to a country's AC (Mowery and Oxley, 1995), a policy planned to develop firms' AC may be very effective in making the country more receptive to international knowledge flows.
To be honest, before attending the course of Innovation