This 2007 report has been prepared by Mr Don Scott-Kemmis and Associates for the Department of Innovation, Industry, Science and Research to investigate the concept of Absorptive Capacity and assess its importance to the National Innovation System. The report provides a comprehensive literature review of Absorptive Capacity, investigates Australian case studies highlighting Absorptive Capacity issues and reviews other countries' policies and programs that build Absorptive Capacity in business.