Innovation occurs when knowledge about unmet customer needs intersects with knowledge about technological solutions. Both knowledge types are often located outside the firm and need to be absorbed in order for innovation to occur. While there has been extensive research into absorptive capacity for solution knowledge, a necessary complement − absorptive capacity for new customer needs − has been neglected. In an individuallevel study of 864 employees from a home appliance firm, we show that need absorptive capacity is theoretically and empirically distinct from solution absorptive capacity, and that both are positively associated with employee innovativeness. Interestingly, we find asymmetric extra-domain effects: prior solution knowledge is positively related to need absorptive capacity (cross-pollination effect), while prior need knowledge is negatively related to solution absorptive capacity (attenuation effect). We contrast the cognitive underpinnings of the two absorptive capacity types, contributing to emerging scholarly thinking on the domain-specificity and micro foundations of absorptive capacity.

Introduction

In 1968, 3M engineer Spencer Silver developed an adhesive technology that had no application inside 3M owing to its poor adhesive power. It was “a solution waiting for a problem to solve” (Spencer Silver (3M, 2003, p. 38)). Years later, during choir rehearsals, 3M engineer Arthur Fry was frustrated to find that his bookmarks were prone to falling out of his scores. Confronted with his personal need for strong yet removable markers, he realized that Silver’s adhesive technology could solve his problem. The combination of Fry’s discovery of an unmet need and Silver’s technological solution resulted in a 3M blockbuster innovation, the Post-it note (3M, 2003). As illustrated in this well-known example, two knowledge types are crucial for innovation: Need knowledge and solution knowledge (Alexander, 1964; von Hippel, 1994). Need knowledge refers to unmet needs arising in the use of a given product or service, while solution knowledge refers to solving technical problems and providing functionality (Alexy et al., 2013). If both knowledge types are available in an organization, and if there is sufficient fit between the two knowledge sets, they can be combined so as to produce innovation. In contrast, if crucial need knowledge or solution knowledge is situated outside organizational boundaries, for instance in the customer domain or in research centers (Chesbrough, 2003b; Laursen and Salter, 2006), it must be absorbed by the firm in order to be used for innovation. Thus, absorptive capacity − i.e. the capacity to identify, assimilate, and apply external knowledge for innovation − is essential for innovation in organizations (Cohen and Levinthal, 1990). The literature focuses almost exclusively on absorptive capacity in relation to technical solution knowledge (Lane et al., 2006; Volberda et al., 2010), which we refer to as solution absorptive capacity. It has been virtually silent on absorptive capacity in relation to need knowledge, i.e. need absorptive capacity. Yet, need knowledge and solution knowledge are fundamentally different knowledge types: need knowledge is more unstructured, more uncertain, more latent, stickier, and harder to transfer than solution knowledge (Autio et al., 2013; Nickerson et al., 2007; Slater and Narver, 1998; von Hippel, 1994). Thus, absorptive capacity in both domains may well have different antecedents and transmission mechanisms.