Antecedents and Consequences of Absorptive Capacity Development through Basic Science Investments

A long line of literature has informed us that firms invest in basic research to develop absorptive capacity that allows them to understand and utilize external knowledge. Yet, we know little about the interactions between absorptive capacity and other internal firm mechanisms, particularly those that may potentially suppress its well-known effects. We examine two sets of such mechanisms as part of a contingent theory of the effect of absorptive capacity on new R&D alliance formations. One set of contingencies is based on the features of the underlying scientific projects that dilute the effect of absorptive capacity. The second set of contingencies is based on internal firm capabilities that lower the firm’s sensitivity to the availability of absorptive capacity. The results of the analysis of a longitudinal database on 216 publicly-traded US pharmaceutical companies provide general support for the proposed theoretical framework of the study.