THE EFFECTS OF NETWORK STRUCTURE ON SLACK AND R&D INTENSITY

We propose an inverse U-shaped relationship between firm slack resources and research and development (R&D) intensity and consider two alliance network contingencies that can influence this relationship: firm centrality and structural holes.We show that the amount of slack available to firms has an inverted U-shape relationship to the high volume of experimentation necessary to pursue bold but risky projects in the biotechnology industry.When slack is low there are not enough resources to experiment, and when it is a high firms can behave in a wasteful way.Furthermore, this relationship varies based on the firms' position within their alliance network, with more central firms needing to invest less, and structural hole brokers investing more of their slack in the R&D process.Our analysis of the U.S. biotechnology industry between 1992 and 2011 provides support for our hypotheses.Overall, our findings show how variations in alliance network structure provide an explanation for how slack resources affect R&D intensity.