Network Position and Firm Performance: Organizational Returns to Collaboration in the Biotechnology Industry

Abstract

We examine the relationship between position in a network of relationships and organizational performance. Drawing on ten years of observations (1988-1997) for nearly 400 firms in the human biotechnology industry, we utilize three types of panel regressions to unravel the complex linkages between network structure, patenting, and various firm-level outcome measures. Our results highlight the critical role of collaboration in determining the competitive advantage of individual biotech firms and in driving the evolution of the industry. We also find that there are decreasing returns to network experience and diversity, suggesting that there are limits to the learning that occurs through interorganizational networks.