Science as an element of innovation strategy: evidence from the pharmaceutical industry

Abstract

An extensive literature has informed us that science matters for firm innovation. But the primary question of interest to strategy research in this regard has remained unanswered: what drives the differences among firms in how tightly they couple science with the other elements of their innovation strategy, and what implications do such differences hold for firms' innovativeness. This study takes a first step to answer this question by focusing on the relationship between science and R&D alliances representing key elements of any firm's innovation strategy. Specifically, I conceptualize absorptive capacity as a latent construct that mediates the link between science productivity and the extent of new R&D alliance formations. I then hypothesize that two sets of factors (scientist-based and firm-based) moderate the strength of the baseline relationship by impacting either the resulting absorptive capacity for a given level of science productivity or the substitutability of absorptive capacity as a driver of new R&D alliance formations. I then move on to explore the role of absorptive capacity at the time of forming new R&D alliances on the long-term benefits of those alliance for the firm's innovative output. The results of the analysis of a longitudinal database on 216 publicly-traded pharmaceutical companies in US between 1990 and 2009 provide general support for the proposed theoretical framework of the study.