Searching in the dark: exploring the technological search process during the business cycle and in the pharmaceutical industry.

Technological innovation is considered as one of the main engine of long-term economic growth. Advancements in several domains have contributed to the outward shift of the production-possibility frontier paving the way to economic development. In particular, technological change occurs when new or improved technologies are introduced into the existing repertoire of knowledge. Drawing on the theory of recombinant invention, this dissertation explores the type and direction of the search process underlying inventions. The first chapter presents a measure of the extent to which combinations of knowledge components in the inventive process conform to established paradigms. The analysis uncover that inventions that build on more novel combinations are more cited, in particular those inventions drawn from established paradigms but that introduce a disruptive combination of components. The second chapter focuses on the extent to which firms adapt their search strategies along the sector business cycle. Firms respond to recessions by decreasing their efforts in innovation both at the intensive (less novel inventions) and extensive margins (overall number of patents) in line with a pro-cyclical trend. The third chapter explores the outcome of the search process by considering the likelihood of success of focal projects that build on previous drug development efforts. Results show that projects that build on firms’ previous successful projects have a higher likelihood to generate marketable drugs, while building on prior failures reduces this likelihood. A similar pattern, though weaker in magnitude, is observed for drug development projects building on prior projects of other firms through vicarious learning. .status: publishe