The Structure of Absorptive Capacity in Three Product Development Strategies

Abstract

This study develops and tests theory about different forms of absorptive capacity that support radical, differentiation and imitation product development strategies. Absorptive capacity theory provides a generalized explanation for how firms exploit their embeddedness in relationships with buyers and suppliers. We develop and test theory that relates combinations of four components of absorptive capacity (R&D capability, product development capability, cooperative embeddedness, and competitive embeddedness) to success rates in three product development strategies. We used data from the American pharmaceutical industry to estimate generalized linear mixed models. Our results confirm known relationships between R&D capability, alliance network position, and the development of radically new products, but reveal different sets of factors that influence differentiation and imitation. We describe a previously undetected influence of competitive embeddedness on the development of radically new products, a contrasting absorptive capacity structure for generic product development, and a mixed structure for differentiated product development.