, MNG3702 Assignment 2 Semester 1 2026 - Due Date 21 April 2026
Question 1: Absorptive Capacity of Tesla Inc.
Absorptive capacity refers to an organisation’s ability to recognise the value of new external
knowledge, assimilate it, and apply it effectively for commercial purposes (Cohen &
Levinthal, 1990). It is a dynamic capability that enables firms to innovate, remain
competitive, and respond to technological changes in their environment.
The concept of absorptive capacity is typically analysed through four key dimensions,
namely acquisition, assimilation, transformation, and exploitation (Zahra & George, 2002).
These dimensions collectively determine how effectively an organisation leverages external
knowledge to enhance performance and innovation.
Firstly, acquisition refers to a firm’s ability to identify and acquire valuable external
knowledge. In the case of Tesla Inc., the company demonstrates strong acquisition
capabilities through its continuous investment in research and development (R&D), strategic
hiring of top engineering talent, and acquisition of innovative firms. For instance, Tesla has
acquired companies in battery technology and automation, enabling it to access cutting-edge
knowledge in electric vehicle (EV) manufacturing and energy storage systems (Mangram,
2012). This shows that Tesla actively scans and absorbs valuable knowledge from its
external environment.
Secondly, assimilation involves the firm’s ability to analyse, process, and understand the
acquired knowledge. Tesla exhibits strong assimilation capabilities through its integrated
organisational structure and culture of knowledge sharing. The company promotes cross-
functional collaboration between software engineers, designers, and manufacturing teams,
allowing new knowledge to be rapidly understood and internalised. This is evident in Tesla’s
ability to quickly incorporate advancements in artificial intelligence and battery efficiency
into its operations (Vance, 2015).
Thirdly, transformation refers to the organisation’s ability to combine existing knowledge
with newly acquired knowledge to create new insights. Tesla demonstrates this dimension
Question 1: Absorptive Capacity of Tesla Inc.
Absorptive capacity refers to an organisation’s ability to recognise the value of new external
knowledge, assimilate it, and apply it effectively for commercial purposes (Cohen &
Levinthal, 1990). It is a dynamic capability that enables firms to innovate, remain
competitive, and respond to technological changes in their environment.
The concept of absorptive capacity is typically analysed through four key dimensions,
namely acquisition, assimilation, transformation, and exploitation (Zahra & George, 2002).
These dimensions collectively determine how effectively an organisation leverages external
knowledge to enhance performance and innovation.
Firstly, acquisition refers to a firm’s ability to identify and acquire valuable external
knowledge. In the case of Tesla Inc., the company demonstrates strong acquisition
capabilities through its continuous investment in research and development (R&D), strategic
hiring of top engineering talent, and acquisition of innovative firms. For instance, Tesla has
acquired companies in battery technology and automation, enabling it to access cutting-edge
knowledge in electric vehicle (EV) manufacturing and energy storage systems (Mangram,
2012). This shows that Tesla actively scans and absorbs valuable knowledge from its
external environment.
Secondly, assimilation involves the firm’s ability to analyse, process, and understand the
acquired knowledge. Tesla exhibits strong assimilation capabilities through its integrated
organisational structure and culture of knowledge sharing. The company promotes cross-
functional collaboration between software engineers, designers, and manufacturing teams,
allowing new knowledge to be rapidly understood and internalised. This is evident in Tesla’s
ability to quickly incorporate advancements in artificial intelligence and battery efficiency
into its operations (Vance, 2015).
Thirdly, transformation refers to the organisation’s ability to combine existing knowledge
with newly acquired knowledge to create new insights. Tesla demonstrates this dimension
