How does basic research improve innovation performance in the world's major pharmaceutical firms?

Bart Leten, Stijn Kelchtermans, Rene Belderbos*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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Abstract

Employing a panel (1995–2015) of large R&D spending pharmaceutical firms, we investigate how internal basic research increases a firm’s innovative performance. We disentangle two mechanisms through which internal basic research affects technology development: (1) as strengthening of the firm’s absorptive capacity to build on externally conducted science, and (2) as a direct source of the firm’s innovation. We find that the positive relationship between internal basic research and innovation performance is significantly mediated by these two mechanisms, with the absorptive capacity mechanism relatively more important. The mediation relationships are more pronounced in recent years, with basic research as a direct source of innovation increasing in importance. This pattern is associated with a decline of corporate investments in basic research over time, and suggests that firms have adopted a more judicious and targeted approach to basic research aimed at getting more leverage out of a smaller commitment to basic research.
Original languageEnglish
Pages (from-to)396-424
Number of pages29
JournalIndustry and Innovation
Volume29
Issue number3
Early online date2 Dec 2021
DOIs
Publication statusPublished - 16 Mar 2022

JEL classifications

  • o31 - Innovation and Invention: Processes and Incentives
  • o32 - Management of Technological Innovation and R&D

Keywords

  • Basic research
  • science-industry linkages
  • innovation
  • pharmaceutical industry
  • RESEARCH-AND-DEVELOPMENT
  • PATENT CITATIONS
  • ABSORPTIVE-CAPACITY
  • SCIENTIFIC-RESEARCH
  • KNOWLEDGE SPILLOVERS
  • ACADEMIC RESEARCH
  • SCIENCE
  • PRODUCTIVITY
  • TECHNOLOGY
  • INDUSTRY

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