Interorganizational Collaboration and the Locus of Innovation: Networks of Learning in Biotechnology

Article excerpt

In recent decades, there has been unprecedented growth in corporate partnering and reliance on various forms of external collaboration (Hergert and Morris, 1988; Mowery, 1988; Hagedoorn, 1990, 1995; Badaracco, 1991; Hagedoorn and Schakenraad, 1992; Gulati, 1995). Historically, firms organized research and development (R&D) internally and relied on outside contract research only for relatively simple functions or products (Mowery, 1983; Nelson, 1990a). Today, companies in a wide range of industries are executing nearly every step in the production process, from discovery to distribution, through some form of external collaboration. These various types of interfirm alliances take on many forms, ranging from R&D partnerships to equity joint ventures to collaborative manufacturing to complex co-marketing arrangements. The most common rationales offered for this upsurge in collaboration involve some combination of risk sharing, obtaining access to new markets and technologies, speeding products to market, and pooling complementary skills (Kogut, 1989; Kleinknecht and Reijnen, 1992; Hagedoorn, 1993; Mowery and Teece, 1993; Eisenhardt and Schoonhoven, 1996).

We do not doubt that the need to combine complementary assets has played a role in the growth of interfirm alliances. Nonetheless, we want to explore a different argument, one that we think has more explanatory power in industries in which knowledge is developing rapidly. A key finding from a diverse set of studies is that the R&D intensity or level of technological sophistication of industries is positively correlated with the intensity and number of alliances in those sectors (C. Freeman, 1991; Hagedoorn, 1995). Viewed broadly, technological change occurs in two forms. When advances build on existing know-how, established firms reap the bulk of the benefits. But when new discoveries create technological discontinuities, or radical breaks from previously dominant methods, incumbents can be robbed of many of their advantages. Moreover, new kinds of organizational practices may emerge to exploit these novel developments (Schumpeter, 1934; Abernathy and Clark, 1985; Tushman and Anderson, 1986; Tushman and Rosenkopf, 1992). Such radical new developments have the potential to restructure a mature industry, hence Schumpeter's phrase: "gales of creative destruction." The most apt recent exemplars are the effects of first the transistor and later the integrated circuit on the electronics industry (J. Freeman, 1990) and the effects of biotechnology on the mature pharmaceutical industry. Biotechnology represents a competence-destroying innovation because it builds on a scientific basis (immunology and molecular biology) that differs significantly from the knowledge base (organic chemistry) of the more established pharmaceutical industry. Consequently, biotech provides enhanced research productivity, with less risk and with more speed and potentially higher rewards (Weisbach and Moos, 1995).

The purpose of this paper is to examine the organizational arrangements that have arisen in response to the technological ferment generated by biotechnology. We focus on forms of collaboration undertaken by dedicated biotechnology firms and assess the contribution of cooperative ventures to organizational learning. In short, we seek to map the network structure of this emerging industry and explain the purposes served by the extensive connections that typify the field.


When there is a regime of rapid technological development, research breakthroughs are so broadly distributed that no single firm has all the internal capabilities necessary for success. Many groups of competitors are likely to be working on the same targets; the rewards go to the swiftest. Thus, new technologies are both a stimulus to and the focus of a variety of cooperative efforts that seek to reduce the inherent uncertainties associated with novel products or markets. …