Understanding Absorptive Capacities is an "Innovation Systems" Context: Consequences for Economic and Employment Growth

This paper seeks to broaden our understanding of the concept underlying absorptive capacity atthe macro -level, paying particular attention to the growth and development perspectives. Weprovide definitions of absorptive and technological capacity, external technology flows,productivity growth, employment creation and their interrelations. We then analyse the elementsof absorptive capability, focusing on the nature of the relationship within a systems view of aneconomy, focusing primarily on the role of firm and non-firm actors and the institutions thatconnect them, both within and across borders. We also undertake to explain how the nature ofabsorptive capacity changes with stages of economic development, and the importance of thedifferent aspects of absorptive capability at different stages. The relationship is not a linear one:the benefits that accrue from marginal increases in absorptive capability change over time.Finally, we provide a tentative and preliminary conceptual argument of how the different stagesof absorptive capacity are related to productivity growth, economic growth and employmentcreation.Key words: New economy, absorptive capacity, knowledge