Behind the Scenes: Sources of Complementarity in R&D

Marco Ceccagnoli, Matthew J. Higgins, Vincenzo Palermo

NBER Working Paper No. 18795
Issued in February 2013
NBER Program(s):   IO   PR

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 study period. However, we find that the degree of complementarity is enhanced for firms with stronger absorptive capacity, economies of scope, and past licensing experience.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.


Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18795

Published: Marco Ceccagnoli & Matthew J. Higgins & Vincenzo Palermo, 2014. "Behind the Scenes: Sources of Complementarity in R&D," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 125-148, 03. citation courtesy of

Users who downloaded this paper also downloaded these:
Aghion, Howitt, and Prantl w18854 Patent Rights, Product Market Reforms, and Innovation
Hall, Lotti, and Mairesse w18053 Evidence on the Impact of R&D and ICT Investment on Innovation and Productivity in Italian Firms
Heutel and Fischer w18794 Environmental Macroeconomics: Environmental Policy, Business Cycles, and Directed Technical Change
Raymond, Mairesse, Mohnen, and Palm w19074 Dynamic Models of R&D, Innovation and Productivity: Panel Data Evidence for Dutch and French Manufacturing
Collard-Wexler and De Loecker w18739 Reallocation and Technology: Evidence from the U.S. Steel Industry
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us