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Absorptive Capacity in NZ Firms: measurement and importance


Motu Economic and Public Policy Research

Date published

22 February 2018


Business productivity has been a key concern for central government for some time in New Zealand. There are two common strategies used to improve firm productivity, the first is to improve economic conditions that influence the business environment, while the second works at a more individual organisation level.

Absorptive capacity is how a firm learns – usually by using knowledge from the external environment to improve their productivity. If firms are not able to learn, then new strategies or technology designed to help firms become more productive are likely to have only limited impact.

This paper uses data from the NZ Business Operation Survey (BOS) to:

  • better understand what contributes to absorptive capacity,
  • examine how firms’ characteristics of firms differ across levels of absorptive capacity, and
  • investigate the impact of absorptive capacity on how firms innovate, undertake R&D, and export.

It then discusses how government policy might have a more direct impact on increasing absorptive capacity and therefore productivity. Please see the downloads for the paper and executive summary.


Productivity growth

The goal of our research is to facilitate a move from an economy that grows by using more “inputs” (such as labour or natural resources), to one where productivity plays a greater role in driving economic growth – essentially, working smarter, with greater financial and knowledge capital employed per worker.

Our research explores a wide range of productivity issues: employment, firm dynamics, technology diffusion, innovation, regional development, spatial and public-sector productivity.

Working together

The commissioning of research and the practice of collaboration with others is important to us. It enables us to access subject/sector specialists and benefit from the cross-promotion of ideas and insights. You will find research from the Commission, as well as research we commissioned, below.

Strengthening learning

Our Economics & Research team is independently evaluated every two years to understand how to improve and enhance our impact. See the latest evaluation report and 2020 survey results here.


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