Paper to be presented at the DRUID Summer Conference 2003 on CREATING, SHARING AND TRANSFERRING KNOWLEDGE. The role of Geography, Institutions and Organizations. Copenhagen June 12-14, 2003 Theme D: Absorptive Capacity and Learning Strategies ABSORPTIVE CAPACITY AND KNOWLEDGE TRANSFER BETWEEN VENTURE CAPITAL FIRMS AND THEIR PORTFOLIO COMPANIES Dr. Cinzia Dal Zotto University of Regensburg Exist-HighTEPP Program Chair for Management of Innovation and Technology 93040 Regensburg, Germany Phone: ++49 (0)941 943 1706 Fax: ++49 (0) 941 943 3230 Email: cinzia.dalzotto@wiwi.uni-regensburg.de Date of submission: May 12, 2003 A brief abstract (100 words) The ability to accumulate new knowledge constitutes a driving force in the development and growth of young firms. Through interorganizational relationships firms can get access to external knowledge and combine it with existing knowledge. In this paper we focus on the relationship between the Venture Capital firm and its Portfolio Companies. Our premise is that the more absorptive capacity both of the partners develop, the more likely it is that knowledge is transferred, assimilated and utilised as a basis of competitive advantage for both partners within the relationship. Furthermore knowledge transfer depends upon the motivation of the Venture Capital firm to invest resources in its portfolio companies. Through learning processes this motivation stimulates the development of absorptive capacity. A few keywords: Absorptive Capacity, Knowledge Transfer, Venture Capital, Entrepreneurial Network, Motivation JEL - code(s): D21, D23, J24, L21, M13