The Knowledge Base of the Firm in Biotechnology based Sectors: Properties and Performance

Firms are becoming increasingly knowledge intensive but we know very little about the ways in which they create and use knowledge. In this paper, we provide a representation of the knowledge base of a firm, defined as the collective knowledge that a firm can use to produce marketable outputs. Here the knowledge base (KB) of the firm will be mapped using patent statistics. In particular, we study the strategic reorientation and subsequent merger of Rhone Poulenc and of Hoechst. Starting from the EPO database, we select the patents of the two firms for the period 1990-1998. We study the changes taking place in the KBs of the two firms, both by patent statistics and by lexicographic analysis. The latter technique allows us to create a map representing the technological classes contained in the patents of the two firms and their links. In our representation, the KB takes the form of a network with technological classes as nodes and with links determined by the co-occurrence of given key words in different technological classes. The networks representing the KBs of the two firms change in the course of time following their strategic decisions. Our objective is to provide conceptual and operational definitions of the KBs of the firms and to analyse the role that the KBs play in the strategic reorientation of the two firms and in their subsequent merger. Central questions concern how the KBs of Hoechst and Rhone Poulenc changed as a consequence of their re-orientation towards the life sciences, and how the nature of the KBs of the two firms influenced the merger.Also, how did the KBs of the two firms change following the merger? What effect would the new KB have on the decision to separate (or not) the agrochemical and pharmaceutical divisions?