Absorptive Capacity and Innovation: Evidence from Pharmaceutical and Biotechnology Firms

Absorptive Capacity and Innovation: Evidence from Pharmaceutical and Biotechnology Firms
Author(s): Fabrizio, Kira
Year: 2006
Paper Number: GBS-OM-2006-002
Goizueta Department: Organization and Management

Abstract

Firms in many industries rely on knowledge that exists outside the boundary of the firm in their own research and development. How firms develop the ability to identify and incorporate external knowledge is an area of active research. This paper adds to this literature in three dimensions. First, I provide direct evidence that pharmaceutical and biotechnology firms investing in particular research activities exploit more public science in their patented inventions. Second, I examine the implications of these research activities for the search process for new innovations by the firm. Results provide evidence of at least some of the mechanisms linking research activities with superior innovative performance. Finally, I present evidence linking these outcomes with superior economic performance for the firm. These results have implications for firm managers as well as the policy debates concerning interactions at the university-industry interface.