In the case of events such as fundamental regulatory reforms or radical technological advances, firms have to undertake discontinuous or dynamic learning. Such learning involves the generation of new capacity through the acquisition of new knowledge and the combination of it with the firm's existing accumulated knowledge. In developing countries the challenge for firms to develop new competencies through dynamic learning is more complex due to political and economic complexities. This paper discusses the limitations of existing frameworks for analysing the process aspect of transformation and proposes a theoretical framework with which to explore dynamic learning in firms from developing countries. The proposed theoretical framework is based on a constructivist approach to organisational knowledge and uses the concept of absorptive capacity. The responses of large pharmaceutical firms to biotechnological change are used to illustrate the areas under investigation. The theoretical framework is used to explore the responses of Indian pharmaceutical firms to changes in patent law required by that country's accession to the World Trade Organisation (WTO). The cases show that the theoretical framework is comprehensive and useful for exploring firm level knowledge processes within firms from developing countries. However a broader analysis of firm‑level learning in developing countries should include an analysis of the institutional environment as this plays an important role in creating environment for firm based learning.