The External Sourcing of Technological Knowledge by US Pharmaceutical Companies: Strategic Goals and Inter-organizational Relationships

This study of the organization of the discovery function by large US pharmaceutical companies (LPCs) examines an important knowledge acquisition strategy—external sourcing of compounds and technologies. Through a critical examination of the “capabilities” thesis in strategic management and of the theoretical conceptualization in organization studies of innovation networks, we undertake an in-depth qualitative analysis of the network relationships LPCs establish with biotechnology firms/public research laboratories. We additionally examine the motivations and degree of strategic intent of R&D managers involved in external knowledge sourcing. The paper identifies the tensions and contradictions in network relationships and indicates how these lead to changes in knowledge sourcing. This qualitative analysis is placed in its industry and technology context. This reveals both the pressures towards and the trends in external knowledge sourcing, as compared with in-house discovery. Extensive interviews with US LPCs and biotechnology firms provide a rare glimpse of how some of the most important actors in global innovation networks handle a significant new innovation strategy.Pharmaceutical industry, knowledge acquisition, licensing, external sourcing, network relationships,