Posted: 4 Jun 2010
Date Written: June 2010
This article uses data on transactions in the pharmaceutical industry to examine the demand-side of technology outsourcing. By integrating a transaction-cost economics perspective with the analysis of internal R&D capabilities, we find that firms with relatively more cospecialized complementary assets or relatively strong internal R&D productivity have a lower propensity to source a technology from outside the firm. We show, however, that since downstream capabilities and internal R&D are complementary activities in the presence of asset specificity and transaction costs, a decrease in internal R&D productivity reduces the marginal value of the downstream assets within firm boundaries, thus stimulating the demand for external technology.
Suggested Citation: Suggested Citation
Ceccagnoli, Marco and Graham, Stuart J.H. and Higgins, Matthew John and Lee, Jeongsik, Productivity and the Role of Complementary Assets in Firms’ Demand for Technology Innovations (June 2010). Industrial and Corporate Change, Vol. 19, Issue 3, pp. 839-869, 2010. Available at SSRN: https://ssrn.com/abstract=1617054 or http://dx.doi.org/dtq033