Radical Innovation and Network Evolution

Abstract

This paper examines how a radical technological innovation affects alliance formation of firms and subsequent network structures. We use longitudinal data of interfirm R&D collaborations in the biopharmaceutical industry in which a new technological regime is established. Our findings suggest that it requires radical technological change for firms to leave their embedded path of existing alliances and form new alliances with new partners. While new partners are mostly found through the firms' existing network, we provide some insight into distant link formation with unknown partners, which contributes to our understanding of how 'small-worlds' might emerge.

Keywords: Pharmaceutical industry, Biotechnology industry, R&D, Technological change, Alliances, Networks

JEL Classification: O32, O31, L14, L24, M13, M21