Working Paper: NBER ID: w28379
Authors: Thomas Jungbauer; Sean Nicholson; June Pan; Michael Waldman
Abstract: Why do firms outsource research and development (R&D) for some products while conducting R&D in-house for similar ones? An innovating firm risks cannibalizing its existing products. The more profitable these products, the more the firm wants to limit cannibalization. We apply this logic to the organization of R&D by introducing a novel theoretical model in which developing in-house provides the firm more control over the new product’s location in product space. An empirical analysis of our testable predictions using pharmaceutical data concerning patents, patent expiration, and outsourcing at various stages of the R&D process supports our theoretical findings.
Keywords: No keywords provided
JEL Codes: D23; L24; L65; O32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Existing patented products (O34) | in-house R&D for new product (O32) |
| Remaining patent duration (C41) | in-house R&D for new product (O32) |
| Expected market share of existing patented products (L17) | in-house R&D for new product (O32) |