Costly Information in Firm Transformation, Exit, or Persistent Failure

28 Pages Posted: 11 Sep 1996 Last revised: 29 Sep 2022

See all articles by Lynne G. Zucker

Lynne G. Zucker

University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)

Michael R. Darby

University of California, Los Angeles (UCLA) - Global Economics and Management (GEM) Area; National Bureau of Economic Research (NBER)

Date Written: May 1996

Abstract

Firms invest differentially in the intellectual human capital required to recognize, evaluate, and utilize technological breakthroughs occurring outside the firm. Such differential investment has been crucial in explaining which incumbent pharmaceutical firms have successfully transformed their technological identities in response to the biotechnological revolution and which are threatened by persistent low performance. While all incumbent firms lagged the dedicated new biotechnology firms in adopting the new drug-discovery technology, firms with higher R&D expenditures before the biotech revolution were more likely to successfully adopt the new techniques and likely to do so earlier. Failure to adopt the new techniques was associated with lower performance compared to firms adopting more fully and faster.

Suggested Citation

Zucker, Lynne G. and Darby, Michael R., Costly Information in Firm Transformation, Exit, or Persistent Failure (May 1996). NBER Working Paper No. w5577, Available at SSRN: https://ssrn.com/abstract=4204

Lynne G. Zucker

University of California, Los Angeles (UCLA) ( email )

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National Bureau of Economic Research (NBER)

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Michael R. Darby (Contact Author)

University of California, Los Angeles (UCLA) - Global Economics and Management (GEM) Area ( email )

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National Bureau of Economic Research (NBER)

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