Exploration and Exploitation Aliances in Biotechnology: A System of New Product Development

Strategic Management Journal, Vol. 25, No. 3, pp. 201-221, 2004

Posted: 3 Sep 2004

See all articles by Frank T. Rothaermel

Frank T. Rothaermel

Georgia Institute of Technology; Georgia Institute of Technology - Scheller College of Business

David L. Deeds

University of St. Thomas - Opus College of Business; Case Western Reserve University - Department of Marketing and Policy Studies

Abstract

We link the exploration-exploitation framework of organizational learning to a technology venture's strategic alliances and argue that the causal relationship between the venture's alliances and its new product development depends on the type of the alliance. In particular, we propose a product development path beginning with exploration alliances predicting products in development, which in turn predict exploitation alliances, and that concludes with exploitation alliances leading to products on the market. Moreover, we argue that this integrated product development path is moderated negatively by firm size. As a technology venture grows, it tends to withdraw from this product development path to discover, develop, and commercialize promising projects through vertical integration. We test our model on a sample of 325 biotechnology firms that entered 2,565 alliances over a twenty-five year period. We find broad support for the hypothesized product development system and the moderating effect of firm size.

Keywords: Strategic alliances, vertical integration, new product development, biotechnology industry

JEL Classification: L1, L22, L23, M13, O31, O32, O33

Suggested Citation

Rothaermel, Frank T. and Deeds, David L., Exploration and Exploitation Aliances in Biotechnology: A System of New Product Development. Strategic Management Journal, Vol. 25, No. 3, pp. 201-221, 2004, Available at SSRN: https://ssrn.com/abstract=580282

Frank T. Rothaermel (Contact Author)

Georgia Institute of Technology ( email )

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Atlanta, GA 30308-1149
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HOME PAGE: http://mgt.gatech.edu/rothaermel

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

David L. Deeds

University of St. Thomas - Opus College of Business ( email )

1000 LaSalle Avenue
TMH 443
Minneapolis, MN 55403
United States

Case Western Reserve University - Department of Marketing and Policy Studies ( email )

Cleveland, OH 44106
United States

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