Firms’ internal capacity to absorb external knowledge or technology play a critical role in open innovation implementation. Using data from 51 US bio-pharmaceutical firms between 1995 and 2006, we explore the extent to which firms’ absorptive capacity influences exploration (patenting and preclinical trials) and exploitation (human clinical trials and NDA). Results show that firm’s cumulative experience is positively associated with the exploitation, and negatively with the exploration. Results also indicate that knowledge diversity has a significant positive effect on exploitation but not exploration.
