Template-type: ReDIF-Paper 1.0
Author-Name: Hagedoorn, John
Author-Email: j.hagedoorn@maastrichtuniversity.nl
Author-Workplace-Name: UNU-MERIT, and Maastricht University
Author-Name: Wang, Ning 
Author-Email: n.wang@maastrichtuniversity.nl
Author-Workplace-Name: Maastricht University 
Title: Is there complementarity or substitutability between internal and external R&D 
	 strategies?
Abstract: The mixed picture of extant research on the relationship between 
	 internal and external R&D prompts us to ask such a question: under what 
	 conditions is there complementarity or substitutability between 
	 different R&D strategies? The goal of this paper is to contribute to the 
	 empirical literature by advancing and testing the contingency of the 
	 relationship between internal and external R&D strategies in shaping 
	 firms‘ innovative output. Using a panel sample of incumbent 
	 pharmaceutical firms covering the period 1986-2000, our empirical 
	 analysis suggests that the level of in-house R&D investments, which is 
	 characterized by decreasing marginal returns, is a contingency variable 
	 that critically influences the nature of the link between internal and 
	 external R&D strategies. In particular, internal R&D and external R&D, 
	 through either R&D alliances or R&D acquisitions, turn out to be 
	 complementary innovation activities at higher levels of in-house R&D 
	 investments, whereas at lower levels of in-house R&D efforts internal 
	 and external R&D are substitutive strategic options. These findings are 
	 robust to alternative specifications and estimation techniques, 
	 including a dynamic perspective on firm innovative performance.
Classification-JEL: O32, L24
Keywords: Complementarity, Substitutability, Internal R&D, External R&D,
	 Innovative Output, Pharmaceutical Industry, Biotechnology
Series: UNU-MERIT Working Papers
Creation-Date: 2010
Number: 005
File-URL: http://www.merit.unu.edu/publications/wppdf/2010/wp2010-005.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2010005