Absorptive capacity: how organisations assimilate and apply knowledge to improve performance

Abstract

In this chapter, we will examine the concept of absorptive capacity – defined as an organisation's ability to access, assimilate and apply new knowledge – and its value and utility in understanding, explaining and predicting public service performance, particularly in relation to the process of managing improvement and turnaround in poorly performing organisations. We will draw on research that we have been undertaking on organisations in the public sector, examining how they respond to evidence that they are performing poorly and what part absorptive capacity plays in determining their response. Introduction Organisations in the public sector are subject to increased monitoring and management of their performance. Schools, hospitals, local authorities, police forces and other public service agencies are required to meet nationally set performance standards and targets and their performance is often publicly reported through league tables, performance indicators, and reports from inspectorates and regulators. While those organisations that are deemed to be high performing may be rewarded, for example, by way of greater freedoms, those whose performance is poor are expected to bring about substantial, and often rapid, improvements in performance. Organisations appear to react to evidence of poor performance in a range of both defensive and proactive ways, some challenging the measures against which they have been judged, others seeking ways to respond to the evidence and bring about the necessary improvements.