Absorptive capacity and technology sourcing: vertical and horizontal relationship in R & D process

Abstract

Firm's decision on external R&D sourcing is influenced by absorptive capacity developed through internal R&D activities by the firm, but it remains unanswered how the effect of absorptive capacity on firm's external sourcing strategy varies on the stage of R&D, i.e, upstream “research” or downstream “development” in a whole R&D process. Based on the fine-grained data set on pharmaceutical R&D, allowing us to identify “research” and “development” activities separately, we have empirically investigated how the relationship between internal R&D and external technology sourcing is affected by the stage of R&D process. In addition, we separate efforts from capabilities for the concept of “absorptive capacity” to see the relationship between internal capacity and external technology sourcing above more precisely. Complementary internal-external relationship is found more for vertical looks (“R” and “D”) and for internal “efforts”, while there are some substitutional relationship between internal “capabilities” for research part and external sourcing in research (horizontal looks).