Absorptive Capacity in Action? R & D, Foreign-Company Technology Licensing, and Product Innovation in Ghana

Foreign technology licensing can give firms rapid access to knowledge that would be costly to develop internally. However, absorptive-capacity theory argues that external knowledge creates value only when firms possess the internal ability to recognize, assimilate and use it. This study examined whether the use of technology licensed from a foreign-owned company was associated with product innovation in Ghana and whether research and development (R&D) engagement strengthened that relationship. The analysis used the Ghana World Bank Enterprise Survey 2023. After removing negative response codes and incomplete controls, the weighted analytical sample contained 682 formal establishments. Product innovation, foreign-company technology licensing and R&D engagement were measured directly from the survey. Hierarchical weighted logistic regression controlled for logged firm age, employment size, foreign ownership, top-manager sector experience, realized industry and region. Average predicted probabilities, alternative survey weights, a domestic-owned subsample, workforce-education controls, six-sector models, influence analysis, cross-validation and 1,000 stratified bootstrap replications were used. The weighted product-innovation rate was 19.0%, 17.4% of firms used licensed technology from a foreign-owned company, and 8.1% engaged in R&D. Licensing had a positive but statistically uncertain association before R&D was included (odds ratio = 1.55, 95% confidence interval [0.95, 2.53], p = .081). In the full interaction model, licensing was not significant among firms without R&D (odds ratio = 0.64, 95% confidence interval [0.31, 1.33], p = .232). R&D was strongly associated with product innovation (odds ratio = 11.26, 95% confidence interval [4.15, 30.54], p < .001). The licensing-by-R&D interaction was not significant (odds ratio = 1.63, 95% confidence interval [0.39, 6.78], p = .503). Adjusted innovation probabilities were 15.5% for firms with neither practice, 10.7% for licensing without R&D, 62.7% for R&D without licensing and 63.6% for firms using both. The findings support the importance of internal R&D capability but do not show that R&D converts foreign-company licensing into a stronger product-innovation advantage. Technology-transfer policy should therefore build internal learning systems and evaluate the depth, relevance and integration of licensed knowledge rather than treating license possession as sufficient.

absorptive capacity, foreign technology licensing, research and development, product innovation, Ghana, Enterprise Survey

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