Internal technological knowledge and the Choice between Acquisition and Alliance

Patent strategy has become an essential part of technology development in R&D intensive industries. A patent portfolio can be built through an internal technology development as well as an external technology sourcing. We consider the context where acquisition and strategic alliance are used as mechanisms to obtain new technology sources beyond a firm’s borders. We empirically explore how a firm’s internal knowledge basis impacts its preferences in external technology sourcing. We consider proximity to science, degree of novelty and quality of patent portfolio as core aspects of internal technological knowledge. Our regression analyses provide evidence on the fact that a high degree of proximity to science of patent portfolio increases the likelihood to prefer acquisition over strategic alliance, but in a decreasing rate. However, a low degree of novelty patent portfolio has a partial impact on the likelihood to prefer acquisition over strategic alliance. Finally, we conclude that quality of patent portfolio increases the likelihood to prefer strategic alliance over acquisition, but in a decreasing rate. We tested our hypotheses on a panel dataset of European firms operating in the biopharmaceutical industry