Only just picked this up on Friday. The Productivity Commission has identified “Absorptive Capacity” as critical to adoption of technology innovation (page 199 of lots of pages), fascinating and reinforces my belief that we need to build capacity and capability in the system itself (eg. District Health Boards, PHOs etc) in order to benefit from innovation:
Absorptive capacity of firms
The above conclusions emerge from the Commission’s research in recent years about the causes of New Zealand’s slow productivity growth. This research uses comprehensive data on individual New Zealand firms and their characteristics. Harris and Le (2018) have written a recent paper in this research programme. Their paper examines the “absorptive capacity” of New Zealand firms, which refers to the capacity of firms to learn – usually by using knowledge from their external environment – to improve their productivity. A focus on the innovative capacity of firms is a necessary counterpart to the government’s role in developing an effective national innovation system. Without enough firms with sufficient capacity, good research will not translate to commercial uptake and effective solutions. An important part of the story about innovation and low emissions is the absorptive capacity of firms to learn about and use clean technologies. Making the most of new technologies is a major challenge for firms. The research indicates that those firms that actively develop their capacity to adapt and learn are much better placed to benefit from the opportunities that new technologies bring. Three key dimensions of absorptive capacity in firms are “use of external knowledge”, “links with national researchers” and “international cooperation with business”. Markers associated with high levels of absorptive capacity in firms are: firms having overseas interests and links (eg, New Zealand multinationals); firms that undertake R&D; firms that innovate and/or export; larger firms; and firms employing greater relative numbers of professionals, managers and technicians. The research concludes that scope exists for policy to improve the absorptive capacity of firms. To the extent this succeeds, these firms are highly likely to innovate more, undertake more R&D, and export more – three “drivers of productivity”. Fonterra (sub. 88) notes that limited capability and “knowledge-transfer” resources hinder the widespread adoption of best practice on farms. This is one example where policy – perhaps in the form of revived farm-advisory extension services could – could play a useful role. When these insights about the absorptive capacity of firms are applied to the challenge of adopting new clean technologies, they suggest the possibility of a double benefit: reduced emissions and improved productivity performance. A corollary is that simply providing external knowledge about clean technologies is unlikely to be enough for firms to adopt them – unless these firms have sufficient absorptive capacity.