Chapter 1: Absorptive Capacity Theory

Multiple Choice

1. The extent to which a firm can recognize the value of new external information, assimilate it, and apply it toward achieving organizational goals is known as:
a) acquisition capacity
b) absorptive capacity
c) assimilation capability
d) transformation capacity
e) electrical capacity

Ans: b
Level: Medium

2. The firm’s prior expenditures; prior knowledge base; and intensity, speed, and direction for obtaining new knowledge is known as:
a) acquisition capacity
b) absorptive capacity
c) assimilation capability
d) transformation capacity
e) electrical capacity

Ans: a
Level: Medium

3. The firm’s routines and processes that enable it to assess, interpret, understand, and learn new knowledge is known as:
a) acquisition capacity
b) absorptive capacity
c) assimilation capability
d) transformation capacity
e) electrical capacity

Ans: c
Level: Medium

4. The firm’s ability to add, delete, recombine, and reconfigure the new knowledge for use in the company is known as:
a) acquisition capacity
b) absorptive capacity
c) assimilation capability
d) transformation capacity
e) electrical capacity

Ans: d
Level: Medium

5. Which one of the following is NOT one of the references to know for Absorptive Capacity Theory:
a) Cohen and Levinthal (1990)
b) Lane et al. (2006)
c) Zahra and George (2002)
d) Eisenhardt (1989)
e) Lane and Lubatkin (1998)

Ans: d
Level: Difficult

6. Which one of the following theories examines the extent to which a firm can recognize the value of new external information, assimilate it, and apply it toward organizational goals:
a) Dynamic Capability Theory
b) Goal Setting Theory
c) Knowledge-Based Theory
d) Organizational Ecology Theory
e) Absorptive Capacity Theory

Ans: e
Level: Easy

7. Which one of the following is NOT one of a firm’s four sources of technical knowledge?
a) the firm borrows new knowledge from other organizations or other sources
b) the firm conducts its own research and development
c) the firm derives new knowledge from its own current manufacturing operations
d) the firm keeps using its own old technical knowledge
e) the firm purchases new knowledgeable people

Ans: d
Level: Medium

8. Which one of the following is NOT one of the four capabilities or dimensions created by Zahra and George (2002):
a) exploitation
b) transformation
c) production
d) assimilation
e) acquisition

Ans: c
Level: Medium

9. Which one of the following statements is CORRECT:
a) acquisition and exploitation are “realized” absorptive capacity
b) transformation and exploitation are “realized” absorptive capacity
c) acquisition and exploitation are “potential” absorptive capacity
d) transformation and exploitation are “potential” absorptive capacity
e) assimilation and exploitation are “unrealized” absorptive capacity

Ans: a
Level: Difficult

10. Which one of the following is NOT one of the criticisms of Absorptive Capacity Theory:
a) Todorova and Durisin (2007) criticized the reformulation of the theory
b) the theory should be reconceptualized as an ongoing process that involves feedback loops
c) the theory has been criticized for not adequately defining absorptive capacity
d) researchers should not use a single-construct to measure absorptive capacity
e) firms can easily absorb and use new knowledge

Ans: e
Level: Difficult

11. Which one of the following is NOT one of the things that managers should do to help their organization absorb and use new knowledge:
a) set up a knowledge culture
b) find ways for the organization to monitor and find better ways of doing things
c) ensure that the organization keeps using its current knowledge and technology
d) create teams of people to promote the acceptance and use of new knowledge
e) build a strong knowledge base

Ans: c
Level: Medium

True/False

12. “Locked-out” means that firms that have never developed a knowledge base.

Ans: True
Level: Medium

13. “Acquisition capacity” is the extent to which a firm can recognize the value of new external information, assimilate it, and apply it toward achieving organizational goals.

Ans: False
Level: Medium

14. “Absorptive capacity” means that the firm’s prior expenditures; prior knowledge base; and intensity, speed, and direction for obtaining new knowledge. 

Ans: False
Level: Medium

15. “Assimilation capability” means that the firm’s routines and processes that enable it to assess, interpret, understand, and learn new knowledge. 

Ans: True
Level: Medium

16. “Science-push absorptive capacity” refers to new knowledge derived from research and scientific sources (such as books, journals, conferences, trade shows, and other academic sources).

Ans: True
Level: Medium

17. “Transformation capability” means that the firm’s ability to add, delete, recombine, and reconfigure the new knowledge for use in the company.

Ans: True
Level: Medium

18. “Gate-keepers” are  individuals who transmit, disseminate, and advocate the use of new 
knowledge across organizational boundaries.

Ans: False
Level: Medium

19. “Boundary-spanners” refers to new knowledge derived from market sources (for example, 
customers, competition, and suppliers).

Ans: False
Level: Medium

20. “Demand-pull absorptive capacity” refers to the firm’s ability to actually change its routines and processes and use the new knowledge.

Ans: False
Level: Medium

21. “Exploitation capability” refers to knowledgeable individuals who assess and evaluate the potential positives and negatives of new knowledge for an organization

Ans: False
Level: Medium

22. Firms that have no knowledge base may never be able to absorb and use new knowledge.

Ans: True
Level: Easy

23. There are two factors that affect an organization’s incentives to acquire new knowledge: 1) the quantity of knowledge available to absorb and exploit, and 2) the difficulty and costs involved in absorbing new knowledge.

Ans: True
Level: Medium

24. The job of a manager is to help his/her firm to better absorb and use new knowledge to accomplish organizational goals, according to Absorptive Capacity Theory.

Ans: True
Level: Easy