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Measuring Competence? Exploring Firm Effects in Pharmaceutical Research

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  • Rebecca Henderson
  • Iain Cockburn

Abstract

Renewed interest in the resource‐based theory of the firm has focused attention on the role of heterogeneous organizational ‘competence’ in competition. This paper attempts to measure the importance of these effects in the context of pharmaceutical research. We distinguish between ‘component’ and ‘architectural’ competence, and using internal firm data at the program level from 10 major pharmaceutical companies show that together the two forms of competence appear to explain a significant fraction of the variance in research productivity across firms. Our results raise some intriguing questions about the nature of competencies and the ways in which they diffuse over time.

Suggested Citation

  • Rebecca Henderson & Iain Cockburn, 1994. "Measuring Competence? Exploring Firm Effects in Pharmaceutical Research," Strategic Management Journal, Wiley Blackwell, vol. 15(S1), pages 63-84, December.
  • Handle: RePEc:bla:stratm:v:15:y:1994:i:s1:p:63-84
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    File URL: https://doi.org/10.1002/smj.4250150906
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    References listed on IDEAS

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    1. Rebecca Henderson & Iain Cockburn, 1996. "Scale, Scope, and Spillovers: The Determinants of Research Productivity in Drug Discovery," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 32-59, Spring.
    2. Holmstrom, Bengt, 1989. "Agency costs and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 12(3), pages 305-327, December.
    3. Cockburn, Iain & Griliches, Zvi, 1988. "Industry Effects and Appropriability Measures in the Stock Market's Valuation of R&D and Patents," American Economic Review, American Economic Association, vol. 78(2), pages 419-423, May.
    4. Jay B. Barney, 1986. "Strategic Factor Markets: Expectations, Luck, and Business Strategy," Management Science, INFORMS, vol. 32(10), pages 1231-1241, October.
    5. Bruce Kogut & Udo Zander, 1992. "Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology," Organization Science, INFORMS, vol. 3(3), pages 383-397, August.
    6. Cockburn, Iain & Henderson, Rebecca, 1994. "Racing to Invest? The Dynamics of Competition in Ethical Drug Discovery," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(3), pages 481-519, Fall.
    7. repec:bla:stratm:v:10:y:1989:i:5:p:399-411 is not listed on IDEAS
    8. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
    9. Henderson, Rebecca., 1994. "The evolution of integrative capability : innovation in cardiovascular drug discovery," Working papers 3711-94., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    10. Rebecca Henderson, 1993. "Underinvestment and Incompetence as Responses to Radical Innovation: Evidence from the Photolithographic Alignment Equipment Industry," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 248-270, Summer.
    11. repec:bla:stratm:v:12:y:1991:i:s2:p:61-74 is not listed on IDEAS
    12. Koenig, Michael E. D., 1983. "A bibliometric analysis of pharmaceutical research," Research Policy, Elsevier, vol. 12(1), pages 15-36, February.
    13. Nathalie Greenan & Dominique Guellec, 1998. "Firm Organization, Technology And Performance: An Empirical Study," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 6(4), pages 313-347.
    14. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, July.
    15. S.A. Lippman & R.P. Rumelt, 1982. "Uncertain Imitability: An Analysis of Interfirm Differences in Efficiency under Competition," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 418-438, Autumn.
    16. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, vol. 80(3), pages 511-528, June.
    17. Holmström, Bengt, 1989. "Agency Costs and Innovation," Working Paper Series 214, Research Institute of Industrial Economics.
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