Three essays on the development and diffusion of pharmaceutical innovations

The thesis comprises three essays on various aspects of the development and diffusion of pharmaceutical innovations, woven together by the idea that the production of clinical knowl- edge influences organizational design, pricing, and advertising decisions in the pharmaceutical industry - that it is an essential ingredient of pharmaceutical firms' technology strategy. The first essay studies why pharmaceutical firms partly contract out the operational aspects of clinical trials to Contract Research Organizations. Using detailed project-level data, I find that (1) outsourcing intensity is sensitive to surprises in the demand for clinical trials services; (2) data-intensive projects are more likely to be outsourced than knowledge-intensive projects; (3) firms that consistently increased their share of outsourced activity over time had more productive internal teams than those that did not. This last result draws attention to the perils of considering a single transaction as the unit of analysis when explaining shifts in firm boundaries.