We examine the paradox of capabilities: although portfolio resources contribute to innovation success, and technologically capable firms have the ability to gain more such resources, firms' "competency traps" and the tension between value creation and value protection reduce benefits from portfolio resources for such firms. Results show that the quality and diversity of portfolio technological resources contribute to breakthrough innovation. The benefits are greater for firms with low internal strength and low internal diversity, thus suggesting positive synergy between portfolio and internal resources for such firms. Technologically strong firms, however, benefit from the quality of their portfolio resources when they overcome some of their competency traps.
This paper addresses two fundamental problems in the absorptive capacity (AC) literature: conceptual ambiguity on what AC is and a lack of synthesized empirical findings showing how AC matters for firm outcomes. We take a two-pronged approach to address these problems: (1) conceptual distillation of the literature to discern the core AC dimensions, outcomes, and contingent external knowledge conditions and (2) meta-analysis of the empirical literature to synthesize the findings. For conceptual distillation, we identify three dimensions of AC: absorptive effort (i.e., the knowledge-building investments made by a firm), absorptive knowledge base (i.e., the current knowledge stock of a firm), and absorptive process (i.e., a firm's internal procedures and practices related to knowledge diffusion). We develop these dimensions by explicating their theoretical roots, functions, mechanisms, and corresponding measures. Leveraging the conceptual distillation, we conduct meta-analyses of the empirical literature and synthesize key
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