Internal Human Capital, Strategic Alliances and the Innovation Performance of Biotechnology Firms

Pek-hooi Soh, Simon Fraser University
Kwanghui Lim, Melbourne Business School
Annapoornima M. Subramanian, National University of Singapore

Abstract

We assess the roles of internal human capital and strategic alliances as antecedents of innovation at the firm and the network levels, respectively, and investigate the effects of their interdependence on firms’ innovation performance. At the firm level, we identify three types of human capital that contribute directly to innovative capability: (1) pure scientists (2) bridging scientists, and (3) pure inventors. At the network level, we explore the performance effects of the firm’s strategic alliances with universities as well as with other firms. Building upon the literature on innovation, we highlight two perspectives on human capital and strategic alliances, which predict opposite moderating effects of the two antecedents of innovation. We reconcile these disparate views by showing that the direction of the moderating effect is contingent upon the types of human capital and strategic alliances involved. Using patent, publication and alliance data from 222 biotechnology firms, we find diminishing returns to university alliances when pure scientists and bridging scientists are involved, whereas the benefits of industry alliances are enhanced in the presence of all three forms of human capital. The findings also suggest that the benefits derived from strategic alliances depend on whether or not they are an extension of the social relationships of human capital within the firm. The reinforcing and substitutive effects of internal human capital on the alliance benefits imply the possible roles that company scientists can play in shaping the alliance portfolios of biotechnology firms.