Essays on Organizational Choices and Innovation in the Biopharmaceutical Industry

This Ph.D. dissertation consists of three chapters that examine how biopharmaceutical firms organize, govern, and capture value when they can choose between internal and external innovation. The first chapter investigates how managerial incentives shape capital allocation across internal and in-licensing sourcing modes and finds that R&D-based compensation schemes lead managers to delay termination of weaker internal projects. The second chapter develops and tests a theory of how firms choose among distinct external innovation sourcing modes – licensing deals, asset acquisitions, and company acquisitions – and how these choices align with project and firm characteristics to create gains from trade. The third chapter examines the sources of firm size advantage in biopharmaceutical innovation and finds that this advantage reflects superior commercialization capabilities that extract more value from innovations, rather than inventive capabilities that generate better drug candidates.