Internal knowledge generation: the research laboratory and innovative productivity in the pharmaceutical industry

As firms face increasing pressures associated with new forms of knowledge-based competition, researchers have begun to focus on knowledge acquisition strategies to the point of ignoring knowledge creation strategies. This paper investigates the impact of research centers in the pharmaceutical industry upon this neglected form of knowledge creation–innovation productivity. We find that firms with separate research facilities are more innovative than firms without such facilities. The results diverge when locational distance of the laboratory is considered for patent versus drug innovations, and vary across diversification types. These findings suggest that managers and researchers need to consider the relationship between the research center and corporate headquarters — and the role of the corporate headquarters — when developing knowledge generation strategies.