Absorptive Capacity in a Non-Market Environment

Improved performance by public sector organizations is a political imperative in numerous countries. There are particular challenges in turnaround of poorly performing organizations. Theoretical explanations of the performance trajectories of public organizations, and especially the causes of failure, highlight the importance of knowledge processes, often from an organizational learning perspective. Absorptive capacity provides an alternative way of theorizing the relationships between organizational performance and knowledge processes, derived from the resource-based view of the firm and the broader concept of dynamic capabilities. The article reviews the conceptual, theoretical, and methodological implications of applying absorptive capacity to the performance of public organizations. It concludes that the approach has value and presents a number of propositions to be tested through empirical study, alongside some more general challenges for researchers who wish to study the concept further. The high political salience of public organizations' performance, and the costs of failure, mandates a major research effort on these issues.