Cohen and Levinthal (1990) define absorptive capacity (AC) as a firm’s ability to
value, assimilate, and utilize new external knowledge.
Prior studies using R&D expenditures as a measure of AC investigate the relationship
between AC and firm innovation R&D intensity (R&D expenditure/sales) as the
measure for AC studies believe that R&D employees may be essentially a subset of
R&D expenditures.