FORTUNE FAVORS THE PREPARED FIRM - COMMENTS

A recent paper in Management Science titled ''Fortune Favors the Prepa red Firm'' (Cohen and Levinthal 1994) is a pioneering work insofar as it introduces the concept of a firm's absorptive capacity-the ability to evaluate, assimilate, and exploit extramural technological developm ents. We appreciate the paper's extensive qualitative discussion of th e nature and role of absorptive capacity. We also commend the authors' idea of constructing a mathematical model to analyze a rational firm' s incentives for an investment in absorptive capacity. However, we fin d that the authors' model overlooks one key element of a firm's absorp tive capacity, namely, the firm's ability to defend itself against the threat of an external technology. In the absence of that element, the authors' model may be able to explain a firm's incentives for an inno vation rather than incentives for the development of an absorptive cap acity. We also identify several internal inconsistencies in the author s' mathematical model. For example, the assumed profit maximization fu nction seems inconsistent with the assumed degree of sophistication of the firm's probability assessment behavior. We believe that the incon sistencies and shortcomings noted here raise serious questions about t he validity of the authors' findings. However, we hope that this note does not detract from the pioneering nature of the authors' work, but instead increases its value by stimulating further work on the importa nt topic of absorptive capacity.