ABSTRACT Pharmaceutical companies have been early adopters of open innovation as a solution to the R&D productivity crisis in the industry. Results regarding the performance implications of open innovation are heterogenous, however. The paradoxical tension between the openness required for collaborative knowledge creation and the control required for the commercialization of said knowledge is a primary explanatory mechanism in the literature. Building on the exploration-exploitation literature we analyze how different open innovation approaches address this tension in the pharmaceutical industry. We test our predictions in a unique data set covering the explorative and exploitative performance of all new medicines launched by the 20 largest pharma companies in the years from 2011 to 2022. In contrast to prior literature, we find that new medicines developed through outside-in innovation have a lower likelihood to be commercial successes. Our results advance a nuanced and contextualized perspective on the performance implications of open innovation.
