absorptive capacity

ability to receive, ability to soak up

In business administration, absorptive capacity is theory or model used to measure a 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, aspiration level, and organizational learning.
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This usually means the ability of a country or organization to receive aid and use it effectively. Developing countries often lack this capacity. For example, a country may receive enough money to enable all its children to attend primary school - but owing to a lack of teachers, lack of schools or a poor administrative system, it is impossible to spend this money in the short term. Work must first be done to train teachers, build schools and improve the efficiency of the system - thus raising the country's ''absorptive capacity''.