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Decomposing Learning by Doing in New Plants
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Entry, Exit, and Diffusion with Learning by Doing

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• The Myopia of Learning
• Author(s): Daniel A. Levinthal and James G. March
• Source: Strategic Management Journal, Vol. 14, Special Issue: Organizations, Decision Making and Strategy (Winter, 1993), pp. 95-112
• Publisher: John Wiley & Sons
• Stable URL: http://www.jstor.org/stable/2486499

Abstract

Organizational learning has many virtues, virtues which recent writings in strategic management have highlighted. Learning processes, however, are subject to some important limitations. As is well-known, learning has to cope with confusing experience and the complicated problem of balancing the competing goals of developing new knowledge (i.e., exploring) and exploiting current competencies in the face of dynamic tendencies to emphasize one or the other. We examine the ways organizations approach these problems through simplification and specialization and how those approaches contribute to three forms of learning myopia, the tendency to overlook distant times, distant places, and failures, and we identify some ways in which organizations sustain exploration in the face of a tendency to overinvest in exploitation. We conclude that the imperfections of learning are not so great as to require abandoning attempts to improve the learning capabilities of organizations, but that those imperfections suggest a certain conservatism in expectations.

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• Absorptive Capacity: A New Perspective on Learning and Innovation
• Author(s): Wesley M. Cohen and Daniel A. Levinthal
• Source: Administrative Science Quarterly, Vol. 35, No. 1, Special Issue: Technology, Organizations, and Innovation (Mar., 1990), pp. 128-152
• Publisher: Johnson Graduate School of Management, Cornell University
• Stable URL: http://www.jstor.org/stable/2393553

Abstract

In this paper, we argue that the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends is critical to its innovative capabilities. We label this capability a firm's absorptive capacity and suggest that it is largely a function of the firm's level of prior related knowledge. The discussion focuses first on the cognitive basis for an individual's absorptive capacity including, in particular, prior related knowledge and diversity of background. We then characterize the factors that influence absorptive capacity at the organizational level, how an organization's absorptive capacity differs from that of its individual members, and the role of diversity of expertise within an organization. We argue that the development of absorptive capacity, and, in turn, innovative performance are history- or path-dependent and argue how lack of investment in an area of expertise early on may foreclose the future development of a technical capability in that area. We formulate a model of firm investment in research and development (RD), in which RD contributes to a firm's absorptive capacity, and test predictions relating a firm's investment in RD to the knowledge underlying technical change within an industry. Discussion focuses on the implications of absorptive capacity for the analysis of other related innovative activities, including basic research, the adoption and diffusion of innovations, and decisions to participate in cooperative RD ventures.