DP3284 Complementarity in the Innovation Strategy: Internal R&D, External Technology Acquisition and Cooperation

Author(s): Bruno Cassiman, Reinhilde Veugelers
Publication Date: March 2002
Keyword(s): complementarity, innovation, R&D, Technology acquisition
JEL(s): D21, O31, O32
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3284

Successful innovation depends on the development and integration of new knowledge in the innovation process. In order to innovate successfully, the firm will combine different innovation activities. In addition to doing own research and development, firms typically are engaged in the acquisition of knowledge on the technology market and cooperate actively in R&D with other firms and research organizations. In this Paper we provide evidence on complementarity between different innovation activities. Using data from the Community Innovation Survey on Belgian manufacturing firms, we show that firms that are only engaged in a single innovation strategy, either internal R&D activities or sourcing technology externally, introduced fewer new or substantially improved products compared to firms which combine internal and external sourcing. This result is consistent with complementarity between own R&D and external technology sourcing activities. Furthermore, we show that the different innovation activities are strongly positively correlated and identify common drivers, resulting in the perceived complementarity between these innovation activities. An important finding is that a capacity to strategically protect intellectual property and a more basic R&D base which may serve as an absorptive capacity, are important common drivers for the different innovation activities.