Firms or Networks: In Search of the Locus of Innovation

This paper addresses the issue of the role of the firm vs. networks in innovation process. It reviews the existing theories in order to understand where the source of innovations is located: in firms or in networks. The on-going debate in the innovation literature does not provide a coherent answer to the relative importance of the firms vs. of networks in innovation process. While the proponents of the firm-centered approach go inside the firm’s organization with the aim of capturing the determinants of the firm’s capacity to innovate, the proponents of network theories tend to search for the source of innovation in networks and consider a firm as a complementary but not a dominant actor in innovation process. This paper aims to explore the core assumptions of the firm-centered and network approaches, to discuss whether they are complementary or contrasting, and to analyze how they may contribute to the understanding and analysis of new biotechnology firms. It focuses on innovation in the biotechnology industry and specifically in new biotechnology firms. The paper suggests that the balance between these two approaches and their integration in the research design would contribute to a fuller and more realistic picture of the processes within the firm and in the biotech industry. This paper helps researchers and policy makers choose the starting point for the analysis of the complex science and technology intensive biotechnology industry and its actors.