Is there complementarity or substitutability between internal and external R&D strategies?

J. Hagedoorn, N. Wang

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

The various strands of extant empirical research are inconclusive about the complementarity or substitutability between different innovation mechanisms, such as internal and external R&D. Using a panel sample of 83 incumbent pharmaceutical firms covering the period 1986-2000, our empirical analysis suggests that, instead of a clear-cut answer to the question of whether internal and external R&D are complementary or substitutive innovation activities, there appears to be a contingent relationship between internal and external R&D strategies in shaping a firm's innovative output. The results from our study indicate that the level of in-house R&D investments, which is characterized by decreasing marginal returns, is a contingency variable that critically influences the association 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. are 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 turn out to be substitutive strategic options.

Original languageEnglish
Pages (from-to)1072-1083
Number of pages12
JournalResearch Policy
Volume41
Issue number6
DOIs
Publication statusPublished - Jul 2012

Keywords

  • Complementarity
  • Substitutability
  • Internal R&D
  • External R&D
  • Innovative output
  • Pharmaceutical industry
  • Biotechnology patents
  • COUNT-PANEL-DATA
  • INNOVATIVE PERFORMANCE
  • MANUFACTURING FIRMS
  • DATA MODELS
  • ENTREPRENEURIAL VENTURES
  • TECHNOLOGICAL-INNOVATION
  • DEVELOPMENT PARTNERSHIPS
  • PHARMACEUTICAL-INDUSTRY
  • DYNAMIC CAPABILITIES
  • ABSORPTIVE-CAPACITY

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