Barriers to Absorptive Capacity and Capability Upgrading in Developing Country Multinationals

We study how barriers to absorptive capacity limit the upgrading of capabilities to international levels by developing country multinational companies (DMNCs). The case of the state-owned Chinese automobile Nanjing Automobile Group reveals additional barriers to absorptive capacity that limit the effective transformation of external knowledge into competitive advantage: not-invented-here biases, whereby employees dismiss external knowledge even if managers recognize its value; management preferences, whereby managers’ biases and career prospects guide the selection of particular knowledge sources; and source relationships, whereby external sources limit the knowledge accessed by the company. These barriers complement other barriers to absorptive capacity discussed in the literature such as appropriability regimes, social integration mechanisms and activation triggers, and provide a more nuanced understanding of absorptive capacity.