The Global Research-and-

Development Network and Its

Effect on Innovation
Changsu Kim and Jong-Hun Park

ABSTRACT
The authors examine the impact of a firm’s innovation by analyzing its position in a global research-and-development
network and its orientation toward using scientific knowledge (science intensity). Drawing on organizational learning
and network theory research, they focus on the moderating role of a firm’s network position in the relationship between
the firm’s science intensity and the impact of its innovation. Data derived from the global pharmaceutical industry indi-
cate that a firm’s science intensity enhances the impact of its innovation by facilitating effective search. This relationship
is reinforced when the firm has network resources derived from an efficient network position. These results support the
idea that the impact of innovation is strengthened when internal research capability and external network resources are
combined. This study, which is conducted in a global industry network context, also enables the authors to examine the
role of international gatekeepers in bridging ties across U.S., Japanese, and European geographic boundaries.

Keywords: research-and-development alliances, science intensity, network resources, innovation impact

s business becomes increasingly global, corporate Sorescu, Chandy, and Prabhu 2003; Yalcinkaya, Calan-

A innovation strategies are also becoming more

global as companies attempt to lower research-
and-development (R&D) costs and gain international
market access and insight (Jaruzelski and Dehoff 2008;
Murray and Chao 2005). Therefore, effective inter-
national learning and innovation have become critical
functions of multinational firms (Griffith and Harvey
2001; Singh 2008), and international marketing
researchers have drawn attention to innovation issues in
the global marketplace (Lee et al. 2008; Özsomer and
Gençtürk 2003). There is a rich tradition in marketing
of studying diverse aspects of innovation and new prod-
uct development (Atuahene-Gima and Murray 2007;
tone, and Griffith 2007). In the study of innovation,
marketing research has emphasized the need for firms to
exploit existing resources while developing new ones
(Atuahene-Gima 2005). This tradition offers a perspec-
tive on innovation that recognizes the value of recom-
bining existing and/or new technologies. By definition,
innovations serve as the basis of new products and serv-
ices in the global marketplace and a firm’s global
competitiveness.
The extant literature emphasizes two sources of innova-
tion: internal development and external collaborations.
State-of-the-art technologies are often developed from

Changsu Kim is Associate Professor of International Business Journal of International Marketing

(e-mail: cskim@sogang.ac.kr), and Jong-Hun Park is Professor ©2010, American Marketing Association
of Strategic Management (the corresponding author, e-mail: Vol. 18, No. 4, 2010, pp. 43–57
johnpark@sogang.ac.kr), Sogang University, Korea. ISSN 1069-0031X (print) 1547-7215 (electronic)

The Global Research-and-Development Network 43

tacit knowledge that is built internally through invest-
ments or “learning by doing” (Teece 1992); however,
recent research has suggested that a firm’s level of inno-
vation can and should be evaluated by considering inter-
nal research efforts jointly with external R&D collabo-
rations (Fabrizio 2009). More specifically, Fleming and
Sorenson (2004) suggest that a firm must clearly under-
stand the directions intended for internal research and
use external R&D to complement it. However, previous
studies (Fabrizio 2009) have not thoroughly tested the
complementary role of internal and external R&D.
The purpose of this study is to examine the issue of
learning and innovation in the context of a global R&D
alliance network to address a gap in innovation research
in the international marketing field. Two important
questions to be addressed include the following: How
does a firm’s internal research enhance its innovation?
and How do internal R&D efforts and external R&D
collaborations interact with each other to improve
innovation?
In this study, we focus on the impact of a firm’s innova-
tion, paying particular attention to the firm’s position in
a network of R&D alliances. We take a network
approach in our study of innovation impact under the
premise that the impact of innovation is largely a func-
tion of the quality and diversity of inputs and that a
firm’s network position is associated with the quality
and diversity of information and resources the firm can
acquire from the alliance network (Swaminathan and
Moorman 2009).
Despite the importance of the network approach in the
study of learning and innovation, international market-
ing literature has paid little attention to the network of
R&D alliances that exists in the global marketplace
(Atuahene-Gima and Murray 2007). For example, the
bulk of past alliance research in the international mar-
keting field has taken the firm, or dyad of firms that
make up an alliance, as the unit of analysis, examining
each alliance partner’s characteristics and the type of
alliance to assess the formation, entry modes, and per-
formance of international collaborations such as inter-
national joint ventures (e.g., Calantone and Zhao
2000). However, studies in organizational theory, such
as that by Powell, Koput, and Smith-Doerr (1996), have
added a network perspective by suggesting that a firm’s
formation of an alliance and the outcomes of that
alliance also depend on the position of the firm in the
network of R&D alliances. Therefore, firm- and dyad-
level alliance studies in international marketing can be
44 Journal of International Marketing
complemented by the network approach we take herein,
which maps a firm’s position in a global network of
R&D alliances.
We organize this article as follows: In the next section,
we discuss theory and develop and propose hypotheses.
In the following sections, we address research design
and testing and provide the results. We conclude with
suggestions for scholarship and innovation practice in
the international marketing field.
THEORY AND HYPOTHESES
Theoretical Model
We examine a firm’s innovation impact by drawing
from research on organizational learning and network
theory. From a network perspective, we investigate
innovation within the boundary of the network in which
firm-level technological trajectories influence and are
influenced by other firms’ trajectories. To capture such
embeddedness in a technological network, it is impor-
tant to understand the extent to which innovations gen-
erated by a firm are recognized and assimilated by other
firms. At a network level, innovations that serve as
sources for many subsequent innovations by other firms
can be considered high-impact innovations (Rosenkopf
and Nerkar 2001). In this study, the term “innovation
impact” refers to the degree to which other members of
a firm’s network have retained and built on that firm’s
technology.
In Figure 1, we hypothesize that a firm’s innovation
impact increases with its science intensity—that is, its
level of efforts and inclination to use scientific knowl-
edge. We hypothesize that such an effect is enhanced by
network position variables such as network efficiency
(i.e., the extent to which the firm’s partners provide
nonredundant information and resources). Our sample
consists of 32 U.S., 33 Japanese, and 24 European firms,
a multinational sample that enables us to examine the
role of international gatekeepers (Spencer 2003). We go
further to hypothesize that the effect of a firm’s science
intensity on its innovation impact will be strengthened
when the firm plays the role of an international gate-
keeper by absorbing knowledge from foreign firms and
disseminating it to local firms.
In Figure 1, the moderation model is specified according
to our view that internally accumulated R&D capabili-
ties are the basic building blocks of innovation (Cohen
and Levinthal 1989). We expect R&D alliances to
Figure 1. Theoretical Model

(+)
Science Intensity Innovation Impact
of a Firm of a Firm

(+)

R&D Alliance Network Position

• Firm network efficiency

• International gatekeeper

complement internal R&D capabilities (Teece 1992)
because each alliance partner is a potential conduit for
valuable information and resources. Thus, being a well-
connected and significant player in an R&D alliance
network can be a crucial strategic advantage in acquir-
ing external technologies and related capabilities (Pow-
ell, Koput, and Smith-Doerr 1996). Therefore, we
hypothesize that the diverse technologies and capabili-
ties acquired from alliance partners contribute to a
firm’s internal ability and effort in producing new high-
impact technology.
Predicting Innovation Impact from Science
Intensity
Innovation builds on knowledge gleaned from scientific
studies (Gittleman and Kogut 2003). In particular, the
pharmaceutical industry, which is our research setting, is
dependent on a complex and always-evolving scientific
research base (Pisano 2006; Sorescu, Chandy, and
Prabhu 2003), largely because of an increasing reliance
on biotechnology for its R&D activities. As a result, the
pharmaceutical industry has become one of the most
science-intensive sectors in the economy (Pisano 2006).
Although the pharmaceutical industry as a whole is sci-
ence driven, we still expect to find firm-level variations
in the level of reliance on science for innovation and that
some firms in the industry conduct more science-driven
R&D than others (Cockburn, Henderson, and Stern
2000).
Our prediction for the direct effect of science intensity
on innovation impact is based on the two lines of logic
that underlie science-driven R&D: those of exploration
and focus. First, science intensity reflects a firm’s ten-
dency to engage in an explorative distant search (Cock-
burn, Henderson, and Stern 2000). Science-based R&D
is uncertain and costly, but the payoffs can be high when
it is successful, which is a typical pattern for an explo-
rative search (Atuahene-Gima 2005; March 1991).
When a firm is more science driven in its R&D, it is
more likely to appreciate the value of exploration and,
consequently, be more willing to engage in exploration
in R&D. As such, the potential for innovative techno-
logical developments in R&D will be greatest when the
firm’s tendency to search for explorative technological
developments is high.
Second, a firm’s science search tends to lead to more
focused R&D. A firm’s focus may help it employ the
results of scientific developments more quickly and
effectively. The capacity of a firm to take advantage of
the results of scientific developments better and faster
than competitors is a major source of competitive

The Global Research-and-Development Network 45

advantage (Cockburn, Henderson, and Stern 2000).
Fleming and Sorenson (2004) show that science-guided
search is closely associated with high-impact innova-
tions, especially for the highly coupled, complex innova-
tions in pharmaceuticals, in contrast to innovations that
work with modular components (e.g., in computers).
Fleming and Sorenson articulate that scientific knowl-
edge enables researchers to focus their searches in the
most likely areas of opportunity, thus ruling out costly
and time-consuming trial-and-error local searches, and
motivates researchers to continue distant searches
despite early failures. In summary, scientific knowledge
provides an understanding of the underlying fundamen-
tal properties involved in generating the observed out-
come (i.e., theories about why it occurs), and this under-
standing facilitates more focused and effective searches
(Fabrizio 2009). Therefore, we hypothesize that a firm’s
science intensity improves its chances of producing high-
impact innovations:
H1: The greater a firm’s science intensity, the
greater is the firm’s innovation impact.
The Moderating Role of Network Position
In this study, we are particularly interested in examining
how a firm’s network position and its structural rela-
tionships with others affect its opportunities to access
distinctive external information and resources. The net-
work concept of range, which describes the extent to
which an actor contacts a diversity of other actors, can
be measured as volume or quality of contacts (Burt
1983). Volume measures the total number of contacts,
and quality measures the extent to which the contacts
provide nonredundant information. We focus on quality
as a key network attribute associated with the impact of
innovation and examine the concept of network effi-
ciency. Furthermore, we examine the network concept
of range with the three regional boundary sets: the
United States, Japan, and Europe. In the case of the
global R&D network, some firms take on the role of
international gatekeeper by bridging ties across regional
geographic boundaries.
Firm Network Efficiency. The concept of network effi-
ciency explicitly focuses on the relationship patterns of
a firm’s partners rather than the firm’s direct ties. By
definition, firm network efficiency arises when a firm’s
partners are separated from one another and implies
access to mutually unconnected partners and, conse-
quently, an efficient, information-rich network. We
focus on network efficiency because it is associated with
46 Journal of International Marketing
the novelty and diversity of information and resources
the firm can acquire from its network (Swaminathan
and Moorman 2009).
Partner redundancy inevitably increases with growth in
the number of a firm’s alliances; therefore, increasing
the number of alliances without considering partner
diversity can create inefficient configurations that yield
less diverse information and resources at greater cost
than a smaller, nonredundant set would yield. A highly
redundant configuration may even prevent a firm from
obtaining new or novel information by limiting the
number of ties a firm can afford to make. Therefore,
more efficient alliance configurations that provide
access to more diverse information and resources with
minimum costs of redundancy will prove most benefi-
cial for a firm’s performance (Baum, Calabrese, and Sil-
verman 2000; Musteen, Francis, and Datta 2010). This
argument is based on the concept of network resources,
in which alliances are knowledge-accessing relationships
and the advantages a firm derives from a portfolio of
alliances depend on the resource profiles of its alliance
partners (Swaminathan and Moorman 2009). However,
managing a large portfolio of alliances can be challeng-
ing, and alliances also bring with them the risk of losing
proprietary technologies to the partner. Thus, it is in a
firm’s best interest to be affiliated with a small number
of nonredundant firms rather than a large number of
redundant firms.
There is reason to expect that a firm’s network efficiency
and its level of science intensity are complementary. A
firm’s ability to generate high-impact innovations is
largely a function of the quality and diversity of inputs.
A science-guided search deepens the firm’s knowledge
base by increasing its understanding of the cutting-edge
scientific developments that may provide the foundation
for the focused research needed for innovation impact.
With efficient exposure to a network of R&D alliances
(i.e., network efficiency), a firm will gain access to
diverse and novel external knowledge (Baum, Cala-
brese, and Silverman 2000) that facilitates the link
between science intensity and innovation. As internal
scientific knowledge accumulates, it tends to generate
path dependence, and diverse and novel external knowl-
edge helps break such path dependence and leads to new
paths of discovery. Moreover, internally accumulated
scientific knowledge can help a firm absorb and use new
external knowledge (Cohen and Levinthal 1989). In this
way, science intensity is a necessary input, and efficient
network position generates the positive interaction. In
other words, the effect of a firm’s science intensity in
bringing in high-impact innovations can be stronger
when it is combined with a more varied and distinctive
set of resources available to the firm because of its net-
work efficiency.
H2a: The positive relationship between a firm’s
science intensity and its innovation impact is
strengthened by the firm’s R&D network
efficiency.
International Gatekeepers. One of the ideas underlying
the network concept of range—the extent to which an
actor contacts a diversity of other actors (Burt 1983)—
is that rational actors attempt to maximize benefits out
of network configurations by modifying the way they
are embedded. We continue to examine the issue of net-
work range but focus on a firm’s brokerage roles in con-
necting international groups. Our sample of 89 firms is
based in three regions (the United States, Japan, and
Europe), and we employ with these three regions the
concept of gatekeepers, which refers to Tushman’s
(1977) classic work, in which gatekeepers represent the
key people in mediating the flow of knowledge from one
group to another.
Applied to our study of a global R&D alliance network,
the term international gatekeepers refers to the few key
firms that bridge geographic boundaries by streamlining
and organizing knowledge flows across regions within
the global network. Thus, international gatekeepers
appropriate information and resources from foreign
firms, convey them to local firms (Spencer 2003), and
have access to unique sources of knowledge because of
their international boundary-spanning roles. Reaching
across borders through R&D alliances provides a way
to gain access to both technological capabilities embed-
ded in partner firms and capabilities embedded in the
partner’s national environment (Jaruzelski and Dehoff
2008). National environments are idiosyncratic with
respect to knowledge bases (Bartholomew 1997), which
provides boundary-spanning firms with broad learning
opportunities that may not be available to their domes-
tic and international rivals (Singh 2008). Moreover,
international gatekeepers are in a strong position to
apply, filter, and reframe knowledge as they pass it from
foreign to local firms (Spencer 2003).
Because of the increasing diversity of idiosyncratic
national (or regional) knowledge bases, international
gatekeepers that serve as a conduit of knowledge across
borders benefit more than other firms from their
science-based focused searches in terms of innovation
The Global Research-and-Development Network 47
impact. Participation in global R&D activities is a
unique source of innovation for international firms
(Jaruzelski and Dehoff 2008), and success in a global
competition for R&D activities rests on the ability to
gain international market access and insight and to fore-
see the scientific and technological developments at a
global level (Singh 2008). The international boundary-
spanning advantage available to international gatekeep-
ers helps them identify global developments, providing
additional opportunities for innovation in the global
marketplace. Therefore, we expect that the benefits
resulting from science intensity are greater when the
firm also engages in international boundary-spanning
activities.
H2b: The positive relationship between a firm’s
science intensity and innovation impact is
strengthened if the firm plays an inter-
national gatekeeper role.
METHODS
Sample and Data Collection
We chose the pharmaceutical industry as the empirical
research context in which to test our hypotheses for
several reasons. First, it is one of the most dynamic
and globalized industries in the world. The nature of
the industry requires pharmaceutical firms to engage in
a wide range of R&D activities, such as DNA and
molecular manipulation, as well as traditional empirical
approaches to drug discovery. Pharmaceutical firms face
strong pressures to develop medicines for a global mar-
ket and exploit economies of scale and scope at the
global level (Pisano 2006). However, the growing inter-
dependence of previously discrete technologies makes it
increasingly difficult for any single firm to stand alone
in this industry (Fleming and Sorenson 2004), and thus
R&D alliances play a critical role in this industry, in
which alliance-based teams race toward the creation
and commercialization of similar end products and a
winner-takes-all situation often exists for new develop-
ments (Powell, Koput, and Smith-Doerr 1996). Second,
the pharmaceutical industry is one of the most science-
intensive industries in the world economic picture
(Pisano 2006). Biotechnology has enabled pharmaceuti-
cal firms to move from a random approach to conduct-
ing a rational design approach, in which compounds are
developed from scientific theories regarding the origins
and evolution of diseases. The latter approach means
that pharmaceutical firms must rely on science more
than ever before (Cockburn, Henderson, and Stern
2000).
We limited our potential sample to firms that belonged
to Standard Industrial Classification 28 during the
period of our research (1988–1994). Furthermore, we
confined our sample to companies whose patent data
were available from CHI Research, Inc., because we
measured a firm’s science intensity and innovation
impact using the CHI patent database. This criterion
resulted in a total of 315 potential firms for our sample.
Then, we combined the CHI data with the R&D
alliance data obtained from the Securities Data Com-
pany database and, because we needed complete panel
data on both R&D alliances and patents, restricted the
sample to R&D alliance pairs that belonged to the CHI
database. This process left us with a final sample of 89
firms (32 U.S., 33 Japanese, and 24 European firms).
Accordingly, our sample consists of 623 firm-year obser-
vations (89 firms over the seven years of our research
period).
Measures
Dependent Variable. Following previous studies (Flem-
ing and Sorenson 2004; Gittelman and Kogut 2003), we
defined the innovation impact of a firm’s patent as the
number of citations the patent received from the other
firms in the five years following the year the patent was
granted. A patent application is required to list the prior
work it builds on, and previous research has demon-
strated that the number of such citations a patent
receives correlates highly with the economic value of the
patent (Jaffe, Trajtenberg, and Henderson 1993). Thus,
we measured the innovation impact of firm i in year t by
the average number of citations (i.e., citations per
patent) cited by the patents of the other firms in our
sample over the subsequent five years (i.e., year t + 1 to
year t + 5). For example, Abbott Laboratories issued
130 patents in 1994, and the 88 other firms in the sam-
ple cited those 130 patents 160 times during the next
five years (i.e., 1995–1999); thus, we measured the
innovation impact of Abbott in 1994 as 1.23 (i.e.,
160/130).
Independent Variable. We measured the science inten-
sity of firm i in year t using the average number of sci-
ence references on the front pages of the firm’s patents
in that year. This variable measures the closeness of the
firm’s technologies to scientific knowledge. Firms that
want to integrate scientific findings into their inventions
are more likely to cite science references in their prior
work (Gittelman and Kogut 2003). Therefore, the level
of science intensity indicates the degree to which the
firm builds its technology using advances in science.
This measure is particularly important in the pharma-
48 Journal of International Marketing
ceutical industry because many cutting-edge and impor-
tant findings in the industry are reported in scientific
journals (Cockburn, Henderson, and Stern 2000).
Moderating Variables. Following the classification of
the Securities Data Company database, we defined
R&D alliances as any form of alliance that involves col-
laboration in R&D activities. Such alliances include
technology licensing agreements and bilateral tech-
nology transfers, such as joint R&D contracts and R&D
joint ventures. We constructed a binary adjacency
matrix in which we recorded the presence of R&D
alliances between firms i and j longitudinally from the
1988 matrix to the 1994 matrix. The matrix was input
into UCINET V software, which computes network
measures. With respect to previous research (Burt
1983), we constructed a measure of network efficiency
that identifies firms as efficient when they maintain
nonredundant ties that provide access to diverse and dis-
tinctive information and resources. More specifically,
we measured the network efficiency of the focal firm i as
follows:
Network efficiencyi = [ΣjZij – Σj ≠ iΣk ≠ iZjk/
ΣjZij]/ΣjZij,
where j represents the focal firm i’s partners, k is the
common partners of firms i and j, and Zij and Zjk are the
number of ties between firms i and j and between firms j
and k, respectively. In other words, we measured the
focal firm’s network efficiency by subtracting the number
of R&D alliances the focal firm has from the average
number of R&D alliances each partner of the focal firm
has and then normalizing the difference by the number
of the focal firm’s R&D alliances. Thus, this measure
reveals the proportion of the focal firm’s nonoverlapping
R&D alliances that provide access to diverse and distinc-
tive information and resources.
International gatekeepers bridge the gaps across the
three regions—the United States, Japan, and Europe—
absorbing information and resources from extraregional
firms and conveying them to intraregional firms. A
firm’s score in the international gatekeeper variable
reflects the number of times it lies on a cross-regional
geodesic, simultaneously linking with an extraregional
and an intra-regional firm. Our geographic regional
demarcation is based on the firm’s home base.
Control Variables. Because a variety of factors can influ-
ence a firm’s innovation impact, we included firm-,
region-, and year-level control variables. For the firm-
level control variables, we controlled for the number of
patents, R&D expenditure, the number of R&D
alliances, and the type of firm. To control for the effects
of a firm’s innovation rate on its innovation impact, we
measured the number of patents by counting the total
number of patents issued to a firm in a given year. We
also controlled for the effect of a firm’s R&D expendi-
ture on its innovation impact. We collected R&D expen-
diture from the COMPUSTAT database (for U.S. firms)
and Global Vantage database (for non-U.S. firms). We
also controlled for the number of R&D alliances. When
firms have R&D alliances with many different firms,
they are likely to occupy a central position in the R&D
alliance network. We also included a firm-type dummy
to determine whether the level of innovation impact sig-
nificantly differs across different firm types. Our sample
consisted of two subsamples based on a firm’s primary
patenting activity: dedicated pharmaceutical firms, such
as Abbott, GlaxoSmithKline, and Yamanouchi, and
diversified pharmaceutical firms, such as DuPont, BASF,
and Sumitomo. We coded the firm-type dummy as 1 for
the dedicated pharmaceutical firms and 0 for the diver-
sified pharmaceutical firms.
Because our data were derived from three regions, we
controlled for regional effects. For each year, we meas-
ured regional network density as the number of R&D
ties in each region divided by the total number of possi-
ble R&D ties in that region; this measure is a reflection
of the abundance of R&D alliances in each region. Fur-
thermore, to control for differences in innovation
impact across years, we included fixed-year effects. We
included six such dummy variables with the year 1988
as a default. Finally, we introduced Japanese and Euro-
pean dummies, with the United States as a default.
Because our sample consists of U.S. and non-U.S. firms,
using U.S. patent data could raise possible biases favor-
able to U.S. firms. However, U.S. patent data are widely
used in studies of the global pharmaceutical industry
(Penner-Hahn and Shaver 2005). Major pharmaceutical
firms tend to patent extensively under the U.S. patent
system because the United States is a major market that
accounts for half of global drug sales and U.S. intellec-
tual property rights are considered critical for any firm
in the industry to do business globally (Ahuja and Katila
2004).
Analysis
Our data set is a panel (pooled cross-sectional time
series). Panel data and methods can control for unob-
served heterogeneity and improve statistical estimates
by enlarging the sample size and capturing both the
average effects across individual units and the dynamic
The Global Research-and-Development Network 49
effects across the entire sample (Greene 2003). How-
ever, care must be taken when conducting statistical
tests on panel data because of the risk of cross-sectional
heteroskedasticity and within-unit serial correlation;
when these are present, the ordinary least squares (OLS)
assumptions of constant variance and uncorrelated
error terms are violated, rendering OLS inappropriate.
To correct for heteroskedasticity and autocorrelated
error terms, we used the generalized least squares
procedure.
Usually, fixed-effects models are preferred in panel data
analyses (Greene 2003). However, we were precluded
from using a fixed-effects approach because our sample
consists of U.S., Japanese, and European firms, and
there are significant differences in innovation impact
among the three groups of firms. If we adopted a fixed-
effect model, we could not include the regional dummy
variables in the regression equation. This is a common
problem when group-level heterogeneity exists within a
sample (Greene 2003). When the fixed-effects approach
is ruled out, a random-effects approach, in which the
fixed effects are uncorrelated with the other independ-
ent variables, can be used. A Hausman test revealed no
significant correlations between our independent
variables and the firm-level fixed effects, so we used
random-effects models to test our hypotheses.
Another important issue is that of causality. To address
this issue, we incorporated temporal precedence by
using a lag structure to ensure that all measures of inde-
pendent variables preceded the dependent variable in
time. As stated previously, we measured science intensity
and network attributes in year t and innovation impact
over the period from year t + 1 to year t + 5.
RESULTS
Table 1 shows the descriptive statistics and the correla-
tion matrix for all the variables included in this study.
Although the means and standard deviations reported
in Table 1 are for unstandardized measures, we used
the standardized values of all variables to test the
hypotheses. Standardization reduces multicollinearity
and facilitates the interpretation of interaction terms
(Aiken and West 1991). To check for multicollinearity,
we ran OLS regressions to generate variance inflation
factors for all the variables and found that all the
variance inflation factor values were less than 2,
substantially lower than the recommended cutoff of 10.
Therefore, we concluded that multicollinearity is not
likely to be an issue.
Table 1. Descriptive Statistics and Correlations

Variable M SD 1 2 3 4 5 6 7 8 9 10 11

1. Innovation impact .85 .61

2. Science intensity 2.42 3.78 .34**

3. Firm network
efficiency .39 .48 .14** .14**

4. International
gatekeeper .14 .68 .04 .08* .22**

5. Number of patents 63.94 88.75 –.05 –.14** .14** .17**

6. R&D expenditure 461.15 429.13 .00 –.06 .14** .07 .77**

7. Number of R&D
alliances .52 .95 .08* .13** .64** .64** .25** .19**

8. U.S. firm dummy .36 .48 .23** .31** .08* .05 .09* –.02 .06

9. Japanese firm dummy .37 .48 –.26** –.28** –.13** –.10** –.29** –.37** –.14** –.57**

10. European firm

dummy .27 .44 .04 –.03 .05 .06 .21** .43** .08* –.45** –.46**

11. Regional network

density .02 .01 .13** .22** .34** .25** .15** .14** .40** .21** –.39** .19**

12. Firm-type dummy .59 .49 .23** .34** .12** –.04 –.31** –.05 .02 .28** –.31** .04 .12**

*p < .05.
**p < .001.

The data in Table 1 demonstrate that science intensity
and network efficiency are positively correlated with
innovation impact. These data indicate that both inter-
nal research efforts and external R&D collaborations
are associated with high-impact innovation. The U.S.
and European firm dummies are positively correlated
with innovation impact, whereas the Japanese firm
dummy is negatively correlated with innovation impact.
However, the patterns and trends across the three
regions (see Figure 2) corroborate that there is a positive
association between science intensity and innovation
impact.
Table 2 presents the descriptive statistics of the U.S.,
European, and Japanese firms. On average, U.S. firms
employed the highest level (4.03) of science intensity,
followed by European firms (2.19) and Japanese firms
(1.02). Network position variables for U.S. and Euro-
pean firms revealed that these firms used external R&D
collaboration more efficiently than Japanese firms. The
data in Table 2 also reveal that the European firms in
our sample had a higher average level of R&D expendi-
ture than their counterparts, which may have led Euro-
pean firms to outperform U.S. and Japanese firms in
terms of the number of patents acquired during our
research period. Table 2 also shows that, in general, U.S.
firms had the highest level of innovation impact, though
they produced a smaller number of patents than Euro-
pean firms. This result may be due to the difference in
science intensity between U.S. and European firms. We
broke the firm types into dedicated pharmaceutical
firms and diversified firms and found that both U.S. and
European groups were dominated by dedicated pharma-
ceutical firms, whereas the Japanese group was domi-
nated by diversified firms. Firm-type data indicate that
the difference in innovation impact across the three
groups is partially affected by the different business
portfolio profiles of these groups.
Table 3 shows the results for the hypotheses tests.
Model 1, a baseline model consisting only of control
variables, indicates that the Japanese firm dummy

50 Journal of International Marketing

Figure 2. Innovation Impact and Science Intensity of U.S., European, and Japanese Firms

Innovation Impact Science Intensity

1.4 6

1.2
8

1
4

.8
3

.6

2
.4

1
.2

0 0
88 89 90 91 92 93 94
Year
Innovation impact of U.S. firms Innovation impact of European firms
Innovation impact of Japanese firms Science intensity of U.S. firms
Science intensity of European firms Science intensity of Japanese firms

(b = –.517, p < .001) and the firm-type dummy (b =
.212, p < .05) have significant effects on innovation
impact. Model 2 shows a significant, positive associa-
tion between science intensity and innovation impact
(b = .252, p < .001). The coefficient of science intensity
remains positive and significant regardless of the model
specification. These results provide strong support for
H1.
Before testing H2, we included network position
variables in the model to control for the main effects of
these variables. Though not our main focus of interest,
the results are presented in Models 3 and 5. Firm net-
work efficiency has a significant and positive effect on
innovation impact, whereas the effect of international
gatekeeper is insignificant.
To examine H2, we also included the interaction term
between science intensity and each of the two network
position variables. Model 4 indicates that the inter-
action term between science intensity and network effi-
ciency is positive and significant (b = .156, p < .001),
and Model 6 shows that the interaction term between
science intensity and international gatekeeper also is
positive and significant (b = .064, p < .05). We included
the two interaction terms together in Model 8 and
found that only the interaction term between science
intensity and firm network efficiency remained positive
and significant (b = .149, p < .001). Taken together,
these results support H2a but only weakly support H2b.
Figure 3 graphically shows the interaction, for which we
relied on Jaccard, Turrisi, and Wan’s (1990) procedure.
First, we divided the sample into two groups based on
the median value of firm network efficiency. We further
divided each of the two groups (i.e., lower and higher
network efficiency groups) into lower and higher science
intensity groups in terms of the median value of science
intensity. Second, we calculated the mean values for
each of the four resulting groups and used the results
from Model 8 (Table 3) to develop plots for the moder-
ating effect of firm network efficiency. As Figure 3

The Global Research-and-Development Network 51

Table 2. Sample Firm Characteristics

Network Positions
Firm Firm Number Science Firm Network International R&D Number of Innovation
Nationality Type of Firms Intensity Efficiency Gatekeeper Expenditurec Patents Impact

U.S. firms Dedicated 25 (78%) 4.786a .483 .158 400.4 53.5 1.083
pharmaceutical (5.866)b (.496) (.503) (323.1) (47.1) (.747)

Diversified 7 (22%) 1.355 .319 .312 606.6 154.9 .922

pharmaceutical (1.082) (.457) (1.215) (440.8) (131.1) (.618)

U.S. Total 32 (100%) 4.036 .447 .191 445.5 75.7 1.048

(5.396) (.492) (.721) (361.3) (84.8) (.722)

European Dedicated 15 (63%) 3.030 .430 .133 636.7 38.4 1.087

firms pharmaceutical (2.472) (.492) (.605) (385.8) (29.8) (.643)

Diversified 9 (37%) .800 .438 .349 985.6 191.1 .594

pharmaceutical (.511) (.494) (1.404) (731.9) (161.3) (.355)

European 24 (100%) 2.194 .433 .214 767.6 95.6 .902

Total (2.253) (1.227) (.985) (565.9) (125.3) (.601)

Japanese Dedicated 13 (39%) 1.549 .362 .022 308.7 18.8 .652

firms pharmaceutical (2.226) (.483) (.147) (141.2) (16.5) (.444)

Diversified 20 (61%) .679 .266 .064 217.4 36.4 .640

pharmaceutical (.647) (.440) (.273) (167.1) (33.2) (.382)

Japanese 33 (100%) 1.022 .304 .047 253.4 29.4 .645

Total (1.541) (.459) (.232) (163.2) (29.1) (.406)

aNumbers are the mean value of the variable.

bNumbers in parentheses are the standard deviation of the variable.
cNumbers are expressed in millions of U.S. dollars.

shows, the positive relationship between science inten-
sity and innovation impact is more pronounced in the
higher network efficiency group than in the lower net-
work efficiency group. This pattern is consistent with
our argument in H2a. Therefore, the interaction graph
presented in Figure 3 provides additional support for
H2a.
DISCUSSION AND CONCLUSION
High-impact innovations represent rare, valuable, and
potentially inimitable sources of competitive advantage
(Rosenkopf and Nerkar 2001). Understanding how
firms create breakthrough innovations and sustain their
preeminence in an industry is of fundamental concern to
academics and practitioners who work to understand
durable and sustained superior performance (Sorescu,
Chandy, and Prabhu 2003).
In this study, we observed that a firm’s science intensity
has a positive direct effect on the impact of its innova-
tion. This finding is consistent with Fleming and Soren-
son’s (2004) observation that utilization of scientific
knowledge in patented inventions generates more inno-
vation impact by facilitating effective search. Further-
more, our data suggest the critical role of science inten-
sity in integrating scientific research (R) with
technological development (D), though previous studies
have suggested that the social structures of the science
world and the technology world are distinct (Murray
2002). Science is characterized by publication and sup-

52 Journal of International Marketing

Table 3. Results of Generalized Least Squares Regression Analysis for Innovation Impact

Independent Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8

Science intensity .252*** .250*** .201*** .252*** .221*** .249*** .197***

(.041) (.041) (.042) (.041) (.044) (.041) (.043)

Firm network efficiency .116* .110* .123* .115*

(.048) (.047) (.051) (.050)

International gatekeeper –.014 –.024 .024 .014

(.048) (.048) (.051) (.050)

Science intensity × firm network efficiency .156*** .149***

(.039) (.043)

Science intensity × international gatekeeper .064* .010

(.030) (.033)

Number of patents –.136† –.075 –.075 –.070 –.073 –.076 –.077 –.072
(.072) (.071) (.071) (.070) (.071) (.071) (.071) (.070)

R&D expenditure .030 .018 .013 .025 .015 .018 .017 .027
(.070) (.068) (.068) (.067) (.068) (.068) (.068) (.067)

Number of R&D alliances .058 .031 –.037 –.043 .041 .039 –.057 –.056
(.042) (.041) (.050) (.049) (.052) (.052) (.066) (.064)

Japanese firm dummy –.517*** –.337** –.335** –.353** –.337** –.345** –.335** –.358**
(.130) (.130) (.130) (.128) (.130) (.130) (.129) (.128)

European firm dummy –.206† –.099 –.092 –.115 –.098 –.097 –.094 –.114
(.106) (.105) (.104) (.103) (.105) (.104) (.104) (.103)

Firm–type dummy .212* .126 .102 .126 .124 .135 .103 .127
(.096) (.095) (.095) (.094) (.095) (.094) (.095) (.094)

Regional network density .124 .118 .116 .107 .119 .127 .113 .106
(.106) (.103) (.103) (.101) (.103) (.103) (.103) (.102)

Year 1989 dummy –.254 –.304† –.322* –.304† –.306† –.319* –.319* –.305†
(.162) (.158) (.157) (.155) (.158) (.157) (.157) (.156)

Year 1990 dummy –.177 –.218 –.239 –.199 –.222 –.220 –.234 –.197
(.166) (.161) (.161) (.159) (.162) (.161) (.161) (.159)

Year 1991 dummy –.318 –.366† –.410* –.349† –.371† –.369† –.405* –.347†
(.196) (.191) (.191) (.189) (.193) (.191) (.191) (.189)

Year 1992 dummy –.251 –.339** –.349* –.337* –.340* –.335* –.348* –.336*
(.154) (.150) (.149) (.147) (.150) (.149) (.149) (.147)

Year 1993 dummy –.109 –.208 –.218 –.168 –.215 –.210 –.207 –.162
(.226) (.220) (.219) (.217) (.221) (.221) (.220) (.218)

Year 1994 dummy –.451 –.534† –.575† –.504 –.539† –.531† –.567† –.501
(.330) (.321) (.320) (.317) (.321) (.320) (.320) (.317)

The Global Research-and-Development Network 53

Table 3. Continued

Independent Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8

Constant .343** .358** .390* .332* .362* .351* .385* .329*

(.165) (.160) (.160) (.159) (.161) (.160) (.160) (.159)

σμ .563 .513 .518 .499 .515 .506 .520 .501

σε .755 .755 .750 .744 .756 .755 .751 .745

ρ .349 .315 .323 .310 .317 .310 .324 .311

Wald chi-square 88.54*** 130.71*** 137.65*** 157.17*** 130.81*** 135.98*** 137.92*** 157.42***

†p < .10.

*p < .05.
**p < .01.
***p < .001.
Notes: This table reports standardized regression coefficients, with standard errors in parentheses.

ported by a priority-based reward system, which is in
contrast to the world of technology, in which ideas are
produced for economic ends and encoded in patents
to facilitate appropriability. Given the two distinctive
communities of science and technology, Gittelman
and Kogut (2003) emphasize the bridging role of
inventors in a firm as a critical function in the firm’s
ability to materialize scientific research into valuable
technologies.
point to the conflicting logic behind innovation rate and
innovation impact. There is an inherent tension between
exploitation and exploration in innovation processes
(March 1991): Exploitation improves innovation effi-
ciency, whereas exploration is required to produce new
technologies of high quality and impact (Atuahene-
Gima 2005). Thus, firms must undergo the paradoxical
strategic task of balancing between exploitative and
explorative innovation strategies (He and Wong 2004).

This study measured science intensity by the extent to
which a firm cites scientific findings in its patents. By
explicitly tying scientific publishing and patenting
together, this measure incorporates the degree to which
a firm encourages inventors who are directly involved in
the firm’s technology development to participate in the
scientific community. We conclude that in circumstances
in which scientific research is tightly linked to tech-
nology developments, how firms access and practice sci-
ence plays a critical role in the production of valuable
technologies.
The data in Table 2 indicate that U.S. firms score rela-
tively high with regard to science intensity and innova-
tion impact, whereas European firms score high in both
R&D expenditure and number of patents. Therefore, it
seems that R&D expenditure is associated with the
number of patents produced, though science intensity
itself is associated with innovation impact. These results
Our finding that science intensity interacts with R&D
alliance network variables supports the complementary
roles of internal and external R&D activities in innova-
tion. In particular, the data support our network moder-
ation argument that the effect of science intensity on
innovation impact is stronger when a firm’s science
intensity is combined with its network resources (i.e.,
the quality and diversity of information and resources
derived from the firm’s position in the network of R&D
alliances). As Table 3 shows, the direct effect of network
variables is, by and large, weak or nonexistent; however,
we estimated all the interaction terms as positive and
significant. Figure 3 also shows that the effect of science
intensity on innovation impact is more pronounced in
the high than the low network efficiency group, provid-
ing support for our argument on firm heterogeneity in
network resources. Not all firms can enhance their inno-
vation impact by configuring their portfolios of alliances
into efficient networks.

54 Journal of International Marketing

Figure 3. Moderating Effect of Firm Network Efficiency
Innovation Impact
2.339
1.276
.438
.187
Low
When the two network variables (firm network effi-
ciency and international gatekeeper) enter an equation
simultaneously, only the significance of the efficiency
variable survives, and that representing the international
gatekeeper variable disappears. These findings suggest
that leveraging knowledge globally, rather than region-
ally, is more important in producing high-impact inno-
vation because the efficiency variable measures the con-
cept of network range in the global industry context,
whereas the international gatekeeper variable measures
the same concept in the domestic-foreign context, with
reference to the United States, Japan, and Europe as
regional groups. This finding agrees with extant inter-
national marketing research on the globalization of
R&D activities (Murray and Chao 2005; Özsomer and
Gençtürk 2003). In an era of globalization, configuring
and managing a portfolio of alliances worldwide has
become more salient and important.
Although this study directly examines the impact of
innovation in a global industry network context, it has
a few limitations. First, notwithstanding the aforemen-
tioned merits of network analysis, with its primary
focus on the network as a whole, network analysis
does not differentiate between the types and modes
of alliances within the domain of a R&D network.
Broadly defined, R&D alliances include technology
Firm network efficiency: high
Firm network efficiency: low
Science Industry
High
licensing, joint R&D contracts, and joint R&D
ventures. However, there is a substantial difference
between R&D alliances designed mainly to effect an
exchange of existing technologies and those designed to
generate new technologies. In addition, R&D alliances
provide access to external complementary technologies,
facilitating the exploitation of existing technologies
(Teece 1992), and offer a way to explore new technolo-
gies jointly with partners (Powell et al. 1996).
Because the exploitative licensing mode is different
from explorative joint R&D modes, for an
ex post check, we eliminated licensing from our sample
and reran the analysis but found no significant devia-
tions from our results. However, distinguishing a net-
work of explorative R&D alliances from that of
exploitative ones remains an area for further research,
perhaps with an enriched database on R&D collabora-
tions. Second, given that cross-country comparisons in
patent indicators are useful areas for study, further
research should be conducted with multicountry patent
data. Third, although we believe our findings can be
generally applicable to other science-intensive indus-
tries in which integrating scientific research with tech-
nology development is important, we admit that such a
claim is actually an empirical question. Therefore, we
also suggest that our findings be validated with further
research in other industrial settings.
The Global Research-and-Development Network 55
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THE AUTHORS
Changsu Kim is Associate Professor of International
Business at Sogang University, Korea. He earned his
doctoral degree at Rutgers University. His research
interests include cross-border alliances, learning and
innovation, and foreign direct investment from emerg-
ing markets.
Jong-Hun Park is Professor of Strategic Management at
Sogang University, Korea. He obtained his doctoral
degree from the Sauder School of Business, University of
British Columbia. His research interests center on strate-
gic leadership, strategic alliance, and innovation
management.
ACKNOWLEDGMENTS
The authors thank the anonymous JIM reviewers for
helpful comments on previous drafts of this article. This
work was supported by grants, including Korea
Research Foundation’s World Class University project
(R31-20002), Korea Research Foundation Grant (KRF-
2009-32A-B00089), and Sogang University Research
Grant of 2010.
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