Effects of Clusters and Business Environment Context on Knowledge Absorption Capacity and Measurement with A Panel Analysis

The theoretical hypotheses of absorptive capacity (AC) are relatively simple; validation and measurement are more complicated. There are still discussions about AC's best proxy or measurement because archival or survey methods may not provide dependable results. Additionally, absorption theories have not researched the effectiveness of a spatial or geographically relevant bounding as a cluster. Exterior factors define absorptive capacities, but their contingent effects on variables and forms are unclear. Limited studies on the external networks and business environment and change in theory versus execution remain essential research subjects. This research aims to explore the effects of clusters and the business environment on absorptive capacity from the perspective of contingency theory. Based on a sample of 38 nations, World Bank, and Global Innovation Index within the 2013-2018 period data, panel analysis shows that cluster inclusion and business environment relative to the nation can strengthen the absorptive capacity. The results also show that the proxy variable of absorptive capacity is significantly related to results.