Absorptive Capacity, Coauthoring Behavior, and the Organization of Research in Drug Discovery

We examine the interface between for‐profit and publicly funded research in pharmaceuticals. Firms access upstream basic research through investments in absorptive capacity in the form of in‐house basic research and ‘pro‐publication’ internal incentives. Some firms also maintain extensive connections to the wider scientific community, which we measure using data on coauthorship of scientific papers between pharmaceutical company scientists and publicly funded researchers. ‘Connectedness’ is significantly correlated with firms’ internal organization, as well as their performance in drug discovery. The estimated impact of ‘connectedness’ on private research productivity implies a substantial return to public investments in basic research.