In business admnistration, 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).