New Challenges in Alliance Portfolio Management - Innovation and Marketing in the Pharmaceutical Industry - page 159

improve the articulation and implementation of a portfolio strategy as well the
evaluation of its performance. Bamford and Ernst ( 2002 ) underscored the impor-
tance of top level involvement in alliance portfolio management: “Unless a cor-
porate executive accepts responsibility for overseeing all or most of a company's
alliances, no one will take the time to identify broader performance patterns or to
assess the company's alliance strategy” (p. 31). Eli Lilly recognizes that alliance
portfolios risk becoming a drain on valuable resources if not sustained by top
management: “we at Lilly must maintain a focus on the core capabilities and
senior management skills necessary to manage a diverse and growing portfolio”
(Lechleiter 2010 , p. 23).
Recent studies in the marketing fi eld have pointed to the key role of top man-
agement in explaining differences in innovativeness across fi rms. Yadav et al.
( 2007 ) fi nd that the future focus of banks' CEOs hastens their adoption of online
banking, while Rao et al. ( 2008 ) report that, in the biotechnology context, the
composition of a fi rm's board of directors (i.e., the presence of technical directors)
increases abnormal stock returns to new product announcements. Finally, Wuyts
and Dutta ( 2008 ) fi nd that biotechnology fi rms' position in the network of inter-
locked directory boards infl uences their success with obtaining new licensing
deals. Thus, there is ample evidence that top management plays a role in explain-
ing differences in innovativeness and performance, opening up a research oppor-
tunity for portfolio studies.
Second, the company should also have the appropriate internal routines to deal
with the exposure to diverse technological knowledge that results from portfolio
diversity. One of the fl agships of successful drug co-development, Merck Research
Laboratories, attributes its successful external knowledge sourcing strategy to its
internal innovative strategy (Pisano 2002 ). Even though academic scholars have
acknowledged for quite some time that internal strategic choices and capabilities
affect a fi rm's ability to screen external opportunities (Arora and Gambardella 1994 ;
Veugelers and Cassiman 1999 ), very little progress has been made both from a
theory and from an empirical point of view.
Interestingly, however, very recent advances in the absorptive capacity literature
offer a theoretical angle that may help revive the research that links internal fi rm
characteristics with external knowledge sourcing. According to the traditional
notion of absorptive capacity (Cohen and Levinthal 1990 ), direct associations
between a fi rm's internal knowledge and external knowledge aid in the assimilation,
transfer, and use of new knowledge. A more recent insight that is gaining accep-
tance in the absorptive capacity literature, however, is that fi rms' ability to value and
absorb external knowledge is a function of higher-order internal routines (i.e.,
behavioral regularities that result from cumulative experiences). These routines
constitute the building blocks of fi rm capabilities that are essential in benefi ting
from external linkages. Lewin et al. ( 2011 ) consider the internal higher-level rou-
tines for managing variation and selection as critical for the development of absorp-
tive capacity. King and Lakhani ( 2011 ) focus on internal invention as a way to learn
about alternative problem-solving modes that can subsequently be practiced when
confronted with external ideas.