TY  - JOUR
AU  - Azoulay,Pierre
TI  - Acquiring Knowledge Within and Across Firm Boundaries: Evidence from Clinical Development
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10083
PY  - 2003
Y2  - November 2003
UR  - http://www.nber.org/papers/w10083
L1  - http://www.nber.org/papers/w10083.pdf
N1  - Author contact info:
Pierre Azoulay
MIT Sloan School of Management
100 Main Street, E62-482
Cambridge, MA 02142
Tel: 617/258-9766
Fax: 617/253-2660
E-Mail: pazoulay@mit.edu
AB  - Considerable evidence suggests that information is acquired more easily within than across firm boundaries. I explore why this is observed in the setting of clinical development. Since the mid-1980s, pharmaceutical firms have partly contracted out the operational aspects of clinical trials to Contract Research Organizations (CROs). Using detailed project-level data for 53 firms, I document that even after controlling for a number of alternative explanations, knowledge-intensive projects are more likely to be assigned to internal teams, while data-intensive projects are more likely to be outsourced. The statistical exercise is complemented by in-depth interviews with six pharmaceutical and biotechnology firms. The qualitative evidence confirms that incentives for knowledge and data production are more easily kept in balance in the firm's own internal labor market than in that of its suppliers. Moreover, firms use relational contracts to ensure that their employees' incentives are both balanced and relatively high-powered.
ER  -