In business administration , absorptive capacity is used to measure firm's ability to value, assimilate, and apply new knowledge. It is studied on multiple levels (individual, group, firm, and national level). Antecedents are prior-based knowledge (knowledge stocks and knowledge flows) as well as communication. It is studied involving a firm's innovation performance, firm's aspiration level, and organizational learning.

The theory bases involve organizational learning, industrial economics, the resource-based view of the firm, dynamic capabilities.

Reference

It was first introduced by Cohen and Levinthal (1990, Absorptive capacity: A new perspective on learning and innovation. In: Administrative Science Quarterly, Volume 24, pg. 128-152).