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The Importance of Absorptive Capacity in the Road to Becoming a “Giant Lion”—ASUSTek Computer Inc

Abstract In Taiwan, small businesses, which account for about 97% of all firms, spawned Taiwan's economic miracle in the 1980s. For the past two decades, the information technology (IT) industry has formed the backbone of Taiwan's economy. There are many theories that have identified a plethora of factors which contribute to the success of a small business. This case study applies the theory of absorptive capacity to ASUSTek Computer Inc., a small Taiwanese business founded on April 2, 1990 by four engineers with capital of NT$30 million (US$950,000) which has grown to become a global leader in the IT industry with a total revenue of NT$755 billion (US$24 billion) and market capitalization of NT$49 billion (US$1.5 billion) as of December 31, 2007. (Based on exchange rate US$1=NT$31.5. ASUS's revenue dropped to NT$668 billion in 2008 mainly due to the global financial crisis.) ASUS' business significantly took off after Jonney Shih joined the company as CEO in 1993. He remains a key anchor of ASUS. ASUS' ability to not only absorb, transform, and utilize new knowledge but develop new technology in-house to create and sustain competitive advantage in the market place has ensured the company's continuing success as well as propelling it to a position of leadership in the IT industry worldwide. This paper will discuss how ASUS' in-house R&D; apprenticeship-style on-the-job training; management leadership's organizational culture and structure—all of which stress learning and innovation; financial resources and conservative fiscal policy; as well as pro-business government policies have provided the foundation and environment for great absorptive capacity to develop and adapt technology, enabling ASUS to become a “Giant Lion” in the global computer industry.