Unpacking Absorptive Capacity: A Study of Knowledge Utilization from Alliance Portfolios

Abstract

To understand how firms facing technological discontinuities utilize knowledge from alliance portfolios, we unpack absorptive capacity into “latitudinal” and “longitudinal” components, corresponding to use of diverse and distant knowledge, respectively. We find that a moderate burden on firms' latitudinal absorptive capacity, corresponding to medium diversity in their portfolios, contributes to optimal knowledge utilization. Simultaneously increasing the demand on firms' longitudinal absorptive capacity affects this relationship negatively. Highlighting important trade-offs between latitudinal and longitudinal absorptive capacities, our findings reveal two portfolio strategies, “telescopic” and “panoptic” searches, that optimize knowledge utilization. We address important dialectics concerning absorptive capacity constraints and knowledge utilization.