LOCAL SEARCH, EXPLORATION FREQUENCY, AND EXPLORATION VALUABLENESS: EVIDENCE FROM NEW PHARMACEUTICALS DEVELOPMENT

Informed by recent theoretical developments concerning absorptive capacity and cognitive representations, we argue that local search positively influences subsequent performance in exploratory innovation. Our empirical analyses of a unique data set on new pharmaceutical development frequency, as well as on official assessments of these pharmaceuticals' valuableness support our argument by showing that knowledge gained as a result of local search increases subsequent performance in exploratory innovation both in terms of its frequency and valuableness. Specifically, local search is shown to be positively associated with the frequency of subsequent exploratory new pharmaceutical developments. We also show that local search is curvilinearly (inverted U-shape) associated with the degree of valuableness of subsequent exploratory new pharmaceuticals. Our empirical findings contribute to the theory of organisational learning and innovation by extending the theory of local search through uncovering more nuanced relationships between local search and subsequent exploratory innovation than those identified by prior works.