Absorptive capacity and the acquisition of external technologies: an empirical investigation of vertical and horizontal relationships in the research and development process1. In addition, we explore the role of absorptive capacity arising from each dimension in the horizontal and vertical relationships between internal and external R&D. Therefore, internal activities and the external acquisition of technology related to these activities are not always co-located in the same long-term phase of the research and development process.
Therefore, it is important to consider whether internal R&D activities and external technology purchasing are in the same phase (horizontal relationship) or in different phases (vertical). We construct hypotheses in the next section based on the argument that these mechanisms depend on the relationship between internal R&D activities and external technology sourcing in the R&D process. Internal R&D efforts are positively related to external technology sourcing when internal and external R&D have a horizontal relationship.
Internal R&D capabilities relate negatively to external technology when internal and external R&D have a horizontal relationship. Specifically, we focus on the effects of internal capabilities in the upstream research phase on external technology sourcing in the downstream development phase. Internal capabilities relate positively to external technology sourcing when internal and external R&D have a vertical relationship.
Internal capabilities relate negatively to external technology sourcing when internal and external R&D have a vertical relationship.
Results
An estimate of the effect of internal efforts and capabilities on external development sourcing (vertical relationship) is obtained by using a logit regression model on the panel data, since the dependent variable (ExDev) is a binary variable. Although the internal R&D effort in the upstream research phase is distant and no direct interaction with external R&D occurs in the downstream development phase, we predict a positive relationship due to the complementarity between them. All models indicate significantly positive results that include internal efforts as an independent variable (models 2, 4, 5 and 6).
We construct alternative hypotheses 4A and 4B based on the premise that internal capabilities have both positive and negative effects on technology outsourcing decisions in a vertical relationship. Furthermore, we argue that the effects of internal capabilities, whether generally positive or negative, are moderated downward by market growth (Hypothesis 5). However, model 6 includes an interaction term between internal capabilities and market growth, and the coefficient is then positive and significant.
The coefficient for the insignificance of internal capabilities when the interaction term is not included in Model 3 is rationalized by the negative moderating effect of market growth; the primary effect of internal capabilities is offset by this effect. A positive and significant effect for (ExMkt) in all models is consistent with previous findings suggesting that firms employ different externalization strategies depending on whether they already have an existing market presence (Gilley & Rasheed, 2000).
Discussion
This result parallels previous research, as internal and external resources are complementary when they are located at different parts of the value chain (Hess & Rothaermel, 2011). Hess and Rothaermel (2011) believe that in such a vertical relationship it is possible to effectively combine internal and external resources in different parts of the value chain, as knowledge redundancy can be avoided. However, this does not apply if internal and external R&D are in different R&D stages.
The knowledge base created as a result of internal capabilities is considered firm-specific and less compatible with external knowledge; therefore, it can increase the substitutability between internal and external R&D (Higgins & Rodriguez, 2006; . Berchicci, 2013). When internal R&D and external knowledge interests are in a vertical relationship, issues of the conflicts and redundancy between them as well as the negative effects of these issues are relatively small. In other words, companies in such a state have fewer incentives to utilize their absorptive capacity for external acquisition and rely on internal R&D.
Specifically, absorptive capacity is recognized as a dynamic capability, as noted in the existing literature (Zahra & George, 2002), and this dynamic capability includes the ability to exploit internal and external firm-specific competencies to address changing environments (Teece et al. , 1997). Our study focuses on firms' behavior in choosing external R&D resources in relation to internal R&D in terms of absorptive capacity theory. Although absorptive capacity is a well-known factor influencing firms' external purchasing strategies, other theoretical perspectives should do so as well.
More complicated aspects of the relationship between internal and external R&D can be clarified by considering this issue. We need to extend internal and external R&D relationships to their outcomes, namely firms' innovation performance, to draw more managerial or political implications. Evaluating and using technological information: scientific knowledge, technological capabilities and external linkages in biotechnology.
Behavioral implications of absorptive capacity: The role of technological effort and technological capability in the utilization of alliance network technological resources. Absorptive capacity: A review, reconceptualization and extension. a) Incumbent companies possess their own internal R&D resources, but acquire external R&D resources to strengthen their R&D. External procurement is performed at both the upstream research and downstream development phases. showed the positive effect of internal efforts, and the negative effect of internal capabilities, on innovation from the alliance networks' resources. Since their data set does not distinguish between the upstream and downstream phases, they indicated this. relationship between internal and external R&D as a whole.
Our study advances the implications of Srivastava et al. 2015) by focusing on the role of absorptive capacity as developed during the upstream research phase in firms' external purchasing decisions at this stage (horizontal views) and in the downstream stage of development (vertical gazes). Research projects in the pharmaceutical industry are mediated by target molecules (for example, the angiotensin receptor or dipeptidyl peptidase-4).
