Working Paper #2010-005
Is there complementarity or substitutability between internal and external R&D strategies?
The mixed picture of extant research on the relationship between
internal and external R&D prompts us to ask such a question: under what
conditions is there complementarity or substitutability between
different R&D strategies? The goal of this paper is to contribute to the
empirical literature by advancing and testing the contingency of the
relationship between internal and external R&D strategies in shaping
firms‘ innovative output. Using a panel sample of incumbent
pharmaceutical firms covering the period 1986-2000, our empirical
analysis suggests that the level of in-house R&D investments, which is
characterized by decreasing marginal returns, is a contingency variable
that critically influences the nature of the link between internal and
external R&D strategies. In particular, internal R&D and external R&D,
through either R&D alliances or R&D acquisitions, turn out to be
complementary innovation activities at higher levels of in-house R&D
investments, whereas at lower levels of in-house R&D efforts internal
and external R&D are substitutive strategic options. These findings are
robust to alternative specifications and estimation techniques,
including a dynamic perspective on firm innovative performance.
- Keywords
-
- Complementarity
- Substitutability
- Internal R&D
- External R&D
- Innovative output
- Pharmaceutical Industry
- Biotechnology
- JEL codes
-
- O32
- L24
- UNU-MERIT
- Working
- Papers
- ISSN
- 1871-9872
Cite this as
APA 7th ed.Hagedoorn, J., & Wang, N. (2010). Is there complementarity or substitutability between internal and external R&D strategies? (UNU-MERIT Working Paper No. 2010-005). UNU-MERIT. https://unu-merit.nl/publications/working-papers/abstract/?id=3893