Acquiring Knowledge Within and Across Firm Boundaries: Evidence from Clinical Development
Considerable evidence suggests that information is acquired more easily within than across firm boundaries. I explore why this is observed in the setting of clinical development. Since the mid-1980s, pharmaceutical firms have partly contracted out the operational aspects of clinical trials to Contract Research Organizations (CROs). Using detailed project-level data for 53 firms, I document that even after controlling for a number of alternative explanations, knowledge-intensive projects are more likely to be assigned to internal teams, while data-intensive projects are more likely to be outsourced. The statistical exercise is complemented by in-depth interviews with six pharmaceutical and biotechnology firms. The qualitative evidence confirms that incentives for knowledge and data production are more easily kept in balance in the firm's own internal labor market than in that of its suppliers. Moreover, firms use relational contracts to ensure that their employees' incentives are both balanced and relatively high-powered.
|Date of creation:||Nov 2003|
|Date of revision:|
|Publication status:||published as Azoulay, Pierre. "Capturing Knowledge Within And Across Firm Boundaries: Evidence From Clinical Development," American Economic Review, 2004, v94(5,Dec), 1591-1612.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maskin, Eric & Tirole, Jean, 1999. "Two Remarks on the Property-Rights Literature," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 139-49, January.
- Andrea Shepard, 1993. "Contractual Form, Retail Price, and Asset Characteristics in Gasoline Retailing," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 58-77, Spring.
- Jonathan Levin, 2003.
"Relational Incentive Contracts,"
American Economic Review,
American Economic Association, vol. 93(3), pages 835-857, June.
- Ackerberg, D.A. & Botticini, M., 1999.
"Endogenous Matching and the Empirical Determinants of Contract Form,"
96, Boston University - Department of Economics.
- Daniel A. Ackerberg & Maristella Botticini, 2002. "Endogenous Matching and the Empirical Determinants of Contract Form," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 564-591, June.
- Daniel A. Ackerberg & Maristella Botticini, 1999. "Endogenous Matching and the Empirical Determinants of Contract Form," Boston University - Institute for Economic Development 92, Boston University, Institute for Economic Development.
- Daniel A. Ackerberg & Maristella Botticini, 1999. "Endogenous Matching and the Empirical Determinants of Contract Form," Papers 0096, Boston University - Industry Studies Programme.
- Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
- D. W. Carlton, 1976.
"Vertical Integration in Competitive Markets Under Uncertainty,"
174, Massachusetts Institute of Technology (MIT), Department of Economics.
- Carlton, Dennis W, 1979. "Vertical Integration in Competitive Markets under Uncertainty," Journal of Industrial Economics, Wiley Blackwell, vol. 27(3), pages 189-209, March.
- Wernerfelt, Birger, 1997. "On the Nature and Scope of the Firm: An Adjustment-Cost Theory," The Journal of Business, University of Chicago Press, vol. 70(4), pages 489-514, October.
- Kirk Monteverde, 1995. "Technical Dialog as an Incentive for Vertical Integration in the Semiconductor Industry," Management Science, INFORMS, vol. 41(10), pages 1624-1638, October.
- Kirk Monteverde & David J. Teece, 1982. "Supplier Switching Costs and Vertical Integration in the Automobile Industry," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 206-213, Spring.
- Abraham, Katharine G & Taylor, Susan K, 1996.
"Firms' Use of Outside Contractors: Theory and Evidence,"
Journal of Labor Economics,
University of Chicago Press, vol. 14(3), pages 394-424, July.
- Katharine G. Abraham & Susan K. Taylor, 1993. "Firms' Use of Outside Contractors: Theory and Evidence," NBER Working Papers 4468, National Bureau of Economic Research, Inc.
- Ringleb, Al H & Wiggins, Steven N, 1990. "Liability and Large-Scale, Long-term Hazards," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 574-95, June.
- Eric von Hippel, 1998. "Economics of Product Development by Users: The Impact of "Sticky" Local Information," Management Science, INFORMS, vol. 44(5), pages 629-644, May.
- Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
- Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
- Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
- Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
- Steven Tadelis, 2002. "Complexity, Flexibility, and the Make-or-Buy Decision," American Economic Review, American Economic Association, vol. 92(2), pages 433-437, May.
- Sara Fisher Ellison & Catherine Wolfram, 2001. "Pharmaceutical Prices and Political Activity," NBER Working Papers 8482, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:10083. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.