Internal Basic Research, External Basic Research and the Technological Performance of Pharmaceutical Firms

We evaluate the impact of basic research on pharmaceutical firms technological performance, distinguishing between internal basic research and the exploitation of external basic research findings. We find that firms increase their performance by engaging more in internal basic research, in particular if basic research is conducted in collaboration with university scientists. The exploitation of external basic research improves performance, while the magnitude increases with firms involvement in internal basic research. Hence, internal basic research and the exploitation of external basic research are complements, suggesting that internal basic research provides firms with the skills to exploit external basic research more effectively.