Technology sourcing and output of established firms in a regime of encompassing technological change

TLDR

The study raises questions about the strategic use of joint ventures amid encompassing technological change. The paper examines how technology sourcing strategies influence capability development for new technical outputs during industry-wide technological change. The authors analyze 1981–91 U.S. pharmaceutical survey and archival data to link internal and external R&D sourcing to biotechnology output. Internal R&D boosts patent output, acquisitions increase biotech product numbers, contracts and licenses enhance biotech expertise reputation, a multifaceted sourcing strategy builds absorptive capacity, while joint ventures are negatively linked to patent output.

Abstract

Abstract This paper argues that when the technological basis of an industry is changing, the firm's approach to technology sourcing plays a critical role in building the capabilities needed to generate new technical outputs. Using survey and archival data from the U.S. pharmaceutical industry during the period 1981–91, we find that different approaches to technology sourcing (internal R&D and external R&D) are related to different types of biotechnology‐based output at the end of the period. Internal R&D was positively associated with patent output. Acquisition activity was positively related to number of biotechnology‐based products. Greater use of R&D contracts and licenses was associated with stronger reputation for possessing expertise in biotechnology. These findings underscore the importance of taking a multifaceted approach to technology sourcing in order to build the absorptive capacity needed to generate new technical output. Surprisingly, we also found that involvement in joint ventures was negatively related to patent output. This raises interesting questions about the strategic use of joint ventures in a regime of encompassing technological change. Copyright © 2003 John Wiley & Sons, Ltd.