NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Vincenzo Palermo

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February 2013Behind the Scenes: Sources of Complementarity in R&D
with Marco Ceccagnoli, Matthew J. Higgins: w18795
Even though management consultants increasingly recommend that in-house research be outsourced, little is known about the conditions favoring substitution or complementarity between internal R&D and external technology acquisition. In this paper, we attempt to provide a deeper understanding of the firm-level drivers of complementarity between these two types of investments through the structural estimation of a flexible innovation production function, such as the translog. Our empirical analysis is based on a unique panel dataset on the R&D and in-licensing expenditures of 94 global pharmaceutical firms active in drug development between 1997 and 2005. Our results suggest that internal R&D and in-licensing in the pharmaceutical industry were neither complements nor substitutes during the s...

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