Absorptive Capacity in NZ Firms: measurement and importance
Business productivity has been a key concern for central government for some time in New Zealand. There are two common strategies used to improve firm productivity, the first is to improve economic conditions that influence the business environment, while the second works at a more individual organisation level.
Absorptive capacity is how a firm learns – usually by using knowledge from the external environment to improve their productivity. If firms are not able to learn, then new strategies or technology designed to help firms become more productive are likely to have only limited impact.
This paper uses data from the NZ Business Operation Survey (BOS) to:
- better understand what contributes to absorptive capacity,
- examine how firms’ characteristics of firms differ across levels of absorptive capacity, and
- investigate the impact of absorptive capacity on how firms innovate, undertake R&D, and export.
It then discusses how government policy might have a more direct impact on increasing absorptive capacity and therefore productivity. Please download the paper and execuitve summary below.