From absorptive capacity fo competence attrition: A linguistic-based theory on external knowledge acquisition

The purpose of this article is to overcome the view that absorptive capacity is a simple function of the level of knowledge or competences inside an organization by introducing a theory of competence attrition. Competence attrition refers to the partial competence loss due to the current competences that are used within an organization, those outside the organization and those which had been previously outsourced. Competence attrition (CA) reduces absorptive capacity (AC) and increases illusion of control. In this article, we will confront the theory of AC with CA and derive novel hypotheses for the level of potential AC in the presence of processes of CA. The insights have also an impact on the concept of multi-competence. The relation between what organizations do and what organizations know appears not to be symmetrical: Case study research investigated the knowledge systems of system companies that need to integrate a variety of components produced by other firms in order to produce final complex products. This research showed that is is necessary for system companies to retain knowledge of many activities that are not obtained directly (Brusoni, Prencipe and Pavitt 2001). In other words, the system companies know more than they do. This case study, conducted on controls for aircraft engines, was extended to research in other areas of high R & D intensity (ranging from hard disk to pharmaceuticals, from numerical control components for the automotive industry). Research on small and medium sized firms in the textile and clothing industry (Guercini 2004, and Guercini Runfola 2004) shows that this need to "know more than you do" can also characterize the business sectors with reduced R & D intensity, such as the production of products for the fashion system. Similarly, the clothing companies have developed a strong activity in retail outlets. The objectives were to a large extent cognitive: not only to communicate but to acquire knowledge and market experience in direct relationship with the customer. In this sense, the "industrial retailers" in the fashion industry can be related to "system companies" that integrate knowledge on what they do not do, having the need to "know more than they do". In an economy in which no firm is an island (Richardson 1972), external competences represent both an opportunity and a necessity for doing business. To some extent companies need to develop AC, understood as the competence to absorb external knowledge and thus competences. While the concept of AC is based on the existence of some (internal) knowledge/competences to acquire new knowledge / competences and while the idea of the system company is based on knowing more or having more competences than those strictly related to doing, they both have one element in common: The non-use or reduced use of a competence. For the system company, was is out-sourced are competences not used. In the case of AC, it is also - in the first place - an external competence, which has not been used and needs to be acquired; but once acquired, it will have an impact on the use of the already existing competences. In this situation of multi-competence, CA plays a role, i.e. the phenomenon of the partial loss of a competence because of the presence of other competences. We will show in this conceptual article how CA moderates the role of AC with important implications for the theoretical concept. As we will show, CA and AC have rather opposite effects in the same context questioning thus the purely positive role of AC.