Technology In-Sourcing and the Creation of Pioneering Technologies

Abstract

This study analyzes the effect of different external technology sourcing modes on the creation of radical innovation in companies. Moreover, since prior research has indicated that exploration consists of looking beyond both organizational and technological boundaries, the role of technological distance between the partnering firms and the role of technological newness are also included. In particular, this article examines how they affect the relationship between external technology sourcing and the creation of pioneering technologies (technologies that do not build on any existing technologies), which are used as a proxy for radical innovations. Using a sample of companies that were active in the pharmaceutical industry, the results indicate that strategic alliances and corporate venture capital investments have a positive effect on the creation of pioneering technologies, whereas the effect of M&As is found to be negative. Additionally, the results show that the impact of these governance modes on the creation of pioneering technology is indeed affected by the newness of the technology and relatedness of the technological portfolios of the partnering firms. A larger technological distance between the two partnering firms increases the effect of strategic alliances on the creation of pioneering technologies. In addition, the results indicate that technological newness weakens the positive effect of CVC investments and non-equity alliances on the creation of pioneering technologies.