Exploiting innovation options:: An empirical analysis of R&D-intensive firms

This paper examines the mechanisms adopted by R&D-intensive firms to appropriate value from research capabilities. New technical opportunities, innovation options, can be exploited through internal development or through their exchange in intermediate knowledge markets. An analysis of biopharmaceutical research projects demonstrates that transaction cast hazards manifest themselves in both the internal and market-mediated alternatives. The impact of information asymmetry conditions is found to be contingent on firm capabilities; firms with high levels of development-related resources demonstrate a negative relationship between information asymmetry conditions and reliance on market exchange, while firms with low levels of such resources demonstrate a positive relationship. (C) 1998 Elsevier Science B.V.