Abstract
We use data from over 1,500 Finnish companies for the years 2006-2008 and 2008-2010 to explore the complementarity of firms' in-house and external R&D strategies with external knowledge search and innovation collaboration strategies. We find that the complementarity of internal and external R&D is asymmetric. The order in which the R&D strategies are adopted matters for the complementarity of strategies. We define search breadth complementarity (tacit knowledge complementarity) of R&D capabilities to exist when a firm's broader external knowledge search (deeper innovation collaboration with external partners) also increases its marginal returns from R&D investments, and vice versa. Our estimation results provide support for the search breadth complementarity and tacit knowledge complementarity of the strategy combining in-house R&D and the acquisition of external R&D. Our empirical exploration further suggests that a broader external knowledge search strategy may decrease the asymmetry between in-house R&D and external R&D.
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