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Transaction costs and capabilities as determinants of the R&D boundaries of the firm: a case study of the ten largest pharmaceutical firms in Japan

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Author Info

  • Masao Nakamura

    (Faculty of Commerce, Institute of Asian Research and Faculty of Applied Science, University of British Columbia, 2053 Main Mall, Vancouver, BC, Canada, V6 T 1Z2)

  • Hiroyuki Odagiri
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    Abstract

    The boundaries of the firm are an important issue in relation not just with the make-or-buy decision in production but also with research and development (R&D). Firms depend on universities to gain scientific knowledge, outsource some of their R&D works, purchase patented technologies, commission research, and participate in consortia. In this paper, we take the case of the 10 major pharmaceutical companies in Japan and show that they employ various types of research alliances with various partners, domestic or foreign. Two major theories to explain the boundaries, the transaction-cost theory and the capability theory, are discussed and we argue that the observed pattern of research alliance is more consistent with the capability theory. Discussion is also made on the consortia and national projects these firms participate. Copyright © 2003 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/mde.1083
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

    Volume (Year): 24 (2003)
    Issue (Month): 2-3 ()
    Pages: 187-211

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    Handle: RePEc:wly:mgtdec:v:24:y:2003:i:2-3:p:187-211

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    Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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    1. Aghion, Philippe & Tirole, Jean, 1994. "On the Management of Innovation," IDEI Working Papers 36, Institut d'Économie Industrielle (IDEI), Toulouse.
    2. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    3. Aghion, Philippe & Tirole, Jean, 1994. "The Management of Innovation," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 1185-1209, November.
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    Cited by:
    1. Sharda, Kirti, . "Back to the Drawing Board: Exploring Gestalts of Work Design in BPO Firms," IIMA Working Papers WP2011-02-04, Indian Institute of Management Ahmedabad, Research and Publication Department.
    2. Baldwin, John R. Beckstead, Desmond Gellatly, Guy, 2005. "Canada's Investments in Science and Innovation: Is the Existing Concept of Research and Development Sufficient?," Economic Analysis (EA) Research Paper Series 2005032e, Statistics Canada, Analytical Studies Branch.
    3. Steven Globerman & Aidan Vining, 2004. "The Outsourcing Decision: A Strategic Framework," International Trade 0404007, EconWPA.
    4. Tsutomu Shibata, 2006. "Japan, Moving Toward a More Advanced Knowledge Economy : Volume 1. Assessment and Lessons," World Bank Publications, The World Bank, number 7081, January.

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