Make, Buy, Organize: The Interplay between Research, External Knowledge, and Firm Structure

We bridge current streams of innovation research to explore the interplay between R&D, external knowledge, and organizational structure–three elements of a firm's innovation strategy which we argue should logically be studied together. Using within-firm patent assignment patterns, we develop a novel measure of structure for a large sample of American firms. We find that centralized firms invest more in research and patent more per R&D dollar than decentralized firms. Both types access technology via mergers and acquisitions, but their acquisitions differ in terms of frequency, size, and integration. Consistent with our framework, their sources of value creation differ: while centralized firms derive more value from internal R&D, decentralized firms rely more on external knowledge. We discuss how these findings should stimulate more integrative work on theories of innovation.