Title

Three essays on technological capabilities and strategies in the U.S. biotechnology industry

Date of Completion

January 2007

Keywords

Business Administration, Management|Economics, General

Degree

Ph.D.

Abstract

The emergence of high-tech industries has created great interest in research on the firm's technological capabilities. This dissertation contributes to this line of research by empirically examining how the firm's technological capabilities influence its strategies, and how strategies are related to firm performance. It consists of three essays.^ Essay 1 seeks to advance and test the knowledge-based theory of the firm as it applies to explaining the governance structure of R&D alliances. To study the role played by firm-specific technological competencies, I consider three technological characteristics of an alliance: technological similarity, technological complementarity, and technological diversity. The results show that technological complementarity and diversity increase the probability that allying firms would select the higher integration mode. Technological similarity, though, bears a non-monotonic relationship with organizational choice. Overall, the results support the knowledge-based argument that the idiosyncrasy in technological traits influences which type of alliance forms would be selected by allying firms.^ Essay 2 aims at a better understanding of how firms allocate their technological capabilities and how different strategies relate to their technological performance. It presents a contribution to the diversification-performance literature by focusing on technological aspects of diversification and proposing a technology-based categorization of diversification strategies. Using a two-dimensional categorization, it studies performance differences in major public biotechnology and pharmaceutical firms during 1990-2004 in the U.S. Among the five diversification strategies, the coherent-and-diversified strategy leads to a higher innovation rate. In fact, the evidence shows that coherent diversification yields an overall better technological performance than experimental diversification.^ Essay 3 examines the relationship between the economic performance of the firm and (i) strategies of leading or following when different firms develop a new stream of applications of a leading edge technology and (ii) strategies of established technological coherence versus novelty in technological combination. I present a quantitative investigation of average tendencies across firms with different technological strategies in the biotechnology industry. The results suggest that leadership and coherence may be interrelated, and that the most successful strategies combine either leadership and established coherence or followership with previously less explored technological combinations in new areas of application.^