Measuring competence? Exploring firm effects in pharmaceutical research

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Citation: Rebecca Henderson, Iain Cockburn (1994) Measuring competence? Exploring firm effects in pharmaceutical research. Strategic Management Journal (RSS)
Internet Archive Scholar (fulltext): Measuring competence? Exploring firm effects in pharmaceutical research
Tagged: Business (RSS) research productivity (RSS), heterogeneity (RSS), embedded knowledge (RSS), competence (RSS)

Summary (Abstract)

Henderson and Clark frame their article at least in part based on their in their 1996 paper Scale, scope, and spillovers: The determinants of research productivity in drug discovery (at the time this paper was published, it was still an NBER working paper). They suggest that their evidence shows a large proportion in variance related to research productivity can be attributed to firm based based fixed effects and show that this variation tends to persist over time. They frame their work in terms of two research questions:

  • What are firms doing differently from each other?
  • Why does this heterogeneity persist?

Henderson and Clark suggest that competence can be measured in terms of component competence which they associated with locally embedded knowledge and particular resources and architectural competence which they associated with the ability to integrate or with capabilities.

They offer four hypotheses (the first two related to component competence and the second two to architectural competence):

  • H1: Drug discovery productivity is an increasing function of firm-specific firm specific expertise in particular disciplinary areas.
  • H2: Drug discovery productivity is an increasing function of component competence in particular disease areas.
  • H3: Firms with the ability to encourage and maintain an extensive flow of information across the boundaries of

the firms will have significantly more productive drug discovery efforts, all other things equal.

  • H4: Firms that encourage and maintain an extensive flow of information across the boundaries between scientific

disciplines and therapeutic classes within the firm will have significantly more productive drug discovery efforts efforts, all other things equal.

The authors present data from 10 pharmaceutical firms and (once again) use a measure of important patents as a dependent variable. They use a deprecated stock of patents to measure disease competence, test H3 with a measure of pro-publication, and test H4 with a series of organizational characteristics associated with the flow of information internally.

The authors use a series of regression models to test their theories and find strong evidence for hypotheses 2, 3, and 4.

Theoretical and Practical Relevance

Henderson and Cockburn's paper has been cited more than 1,300 times in the 16 years since it was published.