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Causal Relationships among Technology Acquisition, Absorptive Capacity, and Innovation Performance: Evidence from the Pharmaceutical Industry

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  • Jieun Jeon
  • Suckchul Hong
  • Jay Ohm
  • Taeyong Yang

Abstract

This paper discusses the importance of absorptive capacity in improving a firm’s innovation performance. Specifically, we examine firm interaction with the knowledge and capabilities of outside organizations and the effect on the firm’s bottom line. We use the impulse-response function of the vector auto-regressive model to gain insight into this relationship by estimating the time required for the effect of each activity level to reach outputs, the spillover effects. We apply this methodology to pharmaceutical firms, which we classify into two sub-groups – large firms and medium and small firms – based on sales. Our results show that the impact of an activity on any other activity is delayed by three years for large firms and by one to two years for small and medium firms.

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  • Jieun Jeon & Suckchul Hong & Jay Ohm & Taeyong Yang, 2015. "Causal Relationships among Technology Acquisition, Absorptive Capacity, and Innovation Performance: Evidence from the Pharmaceutical Industry," PLOS ONE, Public Library of Science, vol. 10(7), pages 1-14, July.
    • Handle: RePEc:plo:pone00:0131642
    DOI: 10.1371/journal.pone.0131642
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    References listed on IDEAS

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    5. Karen Ruckman, 2005. "Technology sourcing through acquisitions: evidence from the US drug industry," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 36(1), pages 89-103, January.
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    1. Demuner-Flores, María del Rosario & Saavedra-García, María Luisa & Ibarra-Cisneros, Manuel Alejandro, 2021. "Influence of absorption capacity on response capacity in small Mexican manufacturing companies," TEC Empresarial, School of Business, Costa Rica Institute of Technology (ITCR), vol. 15(2), pages 34-49.
    2. K D S Fernald & H P G Pennings & J F van den Bosch & H R Commandeur & E Claassen, 2017. "The moderating role of absorptive capacity and the differential effects of acquisitions and alliances on Big Pharma firms' innovation performance," PLOS ONE, Public Library of Science, vol. 12(2), pages 1-22, February.
    3. Hyunwoo Woo & Sun Woo Lim & So Young Sohn, 2021. "Recommending blue ocean technologies for subcontractors: A framework based on business reports of prime contractors and patents," PLOS ONE, Public Library of Science, vol. 16(8), pages 1-17, August.
    4. Carpio Freire, Carlos Raúl & Afcha Chávez, Sergio Moisés, 2020. "Efecto de las barreras de innovación en la capacidad de absorción de las empresas innovadoras || Effect of innovation barriers on the absorptive capacity of innovative companies," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 30(1), pages 3-22, December.

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