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Open innovation provides a framework how firms can benefit from external sources of knowledge. Absorptive capacity explains how firms can create and capture value from in-sourcing external knowledge. Therefore, absorptive capacity and open innovation should be linked to each other. In this study, we provide theoretical model and evidence from a case study how innovating firms in rapidly developing economies have to develop absorptive capacity through a combination of exploitation of the existing knowledge base, R&D investments, learning initiatives, and a open innovation network. This model, gives a better understanding how absorptive capacity is developed.