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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

  • 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
Registered author(s):

    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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    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
    Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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    1. Odagiri, Hiroyuki & Nakamura, Yoshiaki & Shibuya, Minoru, 1997. "Research consortia as a vehicle for basic research: The case of a fifth generation computer project in Japan," Research Policy, Elsevier, vol. 26(2), pages 191-207, May.
    2. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Aghion, Philippe & Tirole, Jean, 1994. "On the Management of Innovation," IDEI Working Papers 36, Institut d'Économie Industrielle (IDEI), Toulouse.
    4. 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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