How Does Basic Research Improve Innovation Performance in the World’s Major Pharmaceutical Firms?

Bart Leten, Stijn Kelchtermans and Rene Belderbos

No 683901, Working Papers of Department of Management, Strategy and Innovation, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven

Abstract: Employing a panel (1995-2015) of large R&D spending pharmaceutical firms, we investigate how internal basic research increases a firm’s innovative performance. We disentangle two mechanisms through which internal basic research affects technology development: (1) as strengthening of the firm’s absorptive capacity to build on externally conducted science, and (2) as a direct source of the firm’s innovation. We find that the positive relationship between internal basic research and innovation performance is significantly mediated by these two mechanisms, with the absorptive capacity mechanism relatively more important. The mediation relationships are more pronounced in recent years, with basic research as a direct source of innovation increasing in importance. This pattern is associated with a decline of corporate investments in basic research over time, and suggests that firms have adopted a more judicious and targeted approach to basic research aimed at getting more leverage out of a smaller commitment to basic research.

Pages: 43
Date: 2021-11-19
New Economics Papers: this item is included in nep-bec, nep-cse, nep-ino, nep-sbm and nep-tid
Note: paper number MSI_2111
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Published in FEB Research Report MSI_2111, issue MSI_2111, pages 1-43

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Journal Article: How does basic research improve innovation performance in the world’s major pharmaceutical firms? (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:msiper:683901

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