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Behind the Scenes: Sources of Complementarity in R&D

Author

Listed:
  • Marco Ceccagnoli
  • Matthew J. Higgins
  • Vincenzo Palermo

Abstract

Management consultants increasingly recommend that internal R&D be outsourced; however, little is known about the substitution or complementarity between internal and external R&D. Through structural estimation of a flexible innovation production function we provide a deeper understanding of firm‐level drivers of complementarity between these two types of investments. Our analysis is based on a unique panel data set on the R&D and in‐licensing expenditures of pharmaceutical firms. Our results suggest that internal R&D and in‐licensing are neither complements nor substitutes. We find that the degree of complementarity is enhanced for firms with stronger absorptive capacity, economies of scope, and licensing experience.

Suggested Citation

  • Marco Ceccagnoli & Matthew J. Higgins & Vincenzo Palermo, 2014. "Behind the Scenes: Sources of Complementarity in R&D," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 125-148, March.
  • Handle: RePEc:bla:jemstr:v:23:y:2014:i:1:p:125-148
    DOI: 10.1111/jems.12048
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    File URL: https://doi.org/10.1111/jems.12048
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    Cited by:

    1. Billette de Villemeur, Etienne & Versaevel, Bruno, 2019. "One lab, two firms, many possibilities: On R&D outsourcing in the biopharmaceutical industry," Journal of Health Economics, Elsevier, vol. 65(C), pages 260-283.
    2. Grimpe, Christoph & Sofka, Wolfgang & Schulz, Philipp & Borchhardt, Geoffrey Thilo, 2019. "Markets for technology in Europe: Mapping demand and its drivers," ZEW Discussion Papers 19-043, ZEW - Leibniz Centre for European Economic Research.
    3. Spyros Arvanitis & Boris Lokshin & Pierre Mohnen & Martin Woerter, 2015. "Impact of External Knowledge Acquisition Strategies on Innovation: A Comparative Study Based on Dutch and Swiss Panel Data," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(4), pages 359-382, June.
    4. García-Vega, María & Huergo, Elena, 2019. "The role of international and domestic R&D outsourcing for firm innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 775-792.
    5. Rehman, Naqeeb Ur, 2015. "Does Internal and External R&D Affect SMEs Innovation Performance? Micro Level Evidence from India and Pakistan," EconStor Preprints 113229, ZBW - Leibniz Information Centre for Economics.
    6. Ashish Arora & Michelle Gittelman & Sarah Kaplan & John Lynch & Will Mitchell & Nicolaj Siggelkow & Denisa Mindruta & Mahka Moeen & Rajshree Agarwal, 2016. "A two-sided matching approach for partner selection and assessing complementarities in partners' attributes in inter-firm alliances," Strategic Management Journal, Wiley Blackwell, vol. 37(1), pages 206-231, January.
    7. Sitnicki Maksym, 2018. "Exploration of the role of business schools in the development of world-class research universities," Technology audit and production reserves, 1(39) 2018, Socionet;Technology audit and production reserves, vol. 1(5(39)), pages 36-45.
    8. Li-Ying, Jason & Mothe, Caroline & Nguyen, Thi Thuc Uyen, 2018. "Linking forms of inbound open innovation to a driver-based typology of environmental innovation: Evidence from French manufacturing firms," Technological Forecasting and Social Change, Elsevier, vol. 135(C), pages 51-63.
    9. María García-Vega & Elena Huergo, 2019. "Asymmetric additionalities between R&D outsourcing locations," Discussion Papers 2019-08, University of Nottingham, GEP.
    10. García-Vega, María & Vicente-Chirivella, Óscar, 2020. "Do university technology transfers increase firms’ innovation?," European Economic Review, Elsevier, vol. 123(C).
    11. Rehman, Naqeeb Ur, 2016. "Does Internal and External Research and Development Affect Innovation of Small and Medium-Sized Enterprises? Evidence from India and Pakistan," ADBI Working Papers 577, Asian Development Bank Institute.
    12. Un, C. Annique & Rodríguez, Alicia, 2018. "Learning from R&D outsourcing vs. learning by R&D outsourcing," Technovation, Elsevier, vol. 72, pages 24-33.
    13. Zhili Tian & Ralph Siebert, 2020. "Dynamic Effects of Licensing and Knowledge Transfer across Research Stages: Evidence from the Pharmaceutical Industry," CESifo Working Paper Series 8311, CESifo.
    14. Maria Garcia-Vega & Oscar Vicente-Chirivella, 2019. "R&D and firm resilience during bad times," Discussion Papers 2019-13, University of Nottingham, GEP.

    More about this item

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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