Research Policy 34 (2005) 1457–1475

Innovation and network structural dynamics: Study of the alliance

network of a major sector of the biotechnology industry
Brigitte Gay a,∗ , Bernard Dousset b
a GRES-LEREPS, Toulouse 1 University, ESC Business School 21, allée de Brienne 31000 Toulouse 6, France
b IRIT, Paul Sabatier University, Toulouse, France

Received 17 November 2004; accepted 26 May 2005

Available online 17 October 2005

Abstract

We study the large-scale topology and dynamics of maps of alliances in a major segment of the biotechnology industry. The
results point to the joint dynamics of network and innovation. The study demonstrates that the network is scale-free. Competition
for links translates into a dynamic exponent that seems to follow the fitter-get-richer model of network growth, with preferential
attachment to firms holding key technologies. This network also shows a small-world effect. This work highlights the strategic
importance of understanding the growth dynamics and structure of collaboration networks for the building of leading positions
in industries led by sustained radical change.
© 2005 Elsevier B.V. All rights reserved.

Keywords: Innovation; Alliances; Network dynamics; Scale-free; Small-world

1. Introduction evolution models are scarce in economics though they

One of the effects of high-growth, technology-
intensive industries is that technology and knowledge
necessary for innovation may lie outside a firm’s tradi-
tional core competence. Inter-firm alliances are widely
recognized as an important organization form of inno-
vative activities that has led to a new view of industry
structure (Hagedoorn, 2002). Network approaches to
the study of strategic alliances or the use of network
∗ Corresponding author. Tel.: +33 5 61 12 88 70;
fax: +33 5 61 12 87 08.
E-mail address: b.gay@esc-toulouse.fr (B. Gay).
recently acquired popularity with the recognition that
social and economic networks are influential in deter-
mining the cumulative economic outcomes (Ahuja,
2000; Cowan et al., 2002; Jackson and Wolinsky, 1996;
Jackson and Watts, 1998; Powell, 1996; Walker et al.,
1997a,b). The literature provides widely different inter-
pretations of networks, ranging from economic expla-
nations based on alternative theoretical models such as
the transaction cost theory or the competence-based
view of organizations to social approaches. Impor-
tantly, knowledge diffusion occurs through interaction,
and thus the structure over which organizations interact
influences the scope of diffusion and thus the inno-

0048-7333/$ – see front matter © 2005 Elsevier B.V. All rights reserved.
doi:10.1016/j.respol.2005.07.001
1458 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475
vative potential of the economy (Cowan and Jonard,
2004). However, there is little explicit examination of
how a market processes knowledge. Against this back-
ground, this paper aims to establish a closer connection
between the dynamics of invention, individual and col-
lective, and alliance networks structure and evolution.
This study is also important for the theory and man-
agement of firm boundary decisions since firms need
to exploit, participate in, and position themselves opti-
mally in networks that are modelled by global sustained
innovation and radical change.
In order to decipher the topology of networks, we
first need to understand the dynamical processes that
determine their evolution. Evolving networks display
a high degree of complexity, due to the inherent wiring
entanglement occurring during their growth. This data-
driven study relies on network visualization tools and
statistical analysis to focus on the topology and evolu-
tion of a real network, the collaborative relationships
among firms and other institutions in a major seg-
ment of the biotechnology industry, the antibody sector.
Therapeutic antibodies1 form one of the fastest grow-
ing segments of the pharmaceutical market. In 2003,
30% of the industry was considered to be driven by
antibody technology (Moore, 2003). Using as sam-
ple the alliances made in a well defined segment of
the biotechnology industry where the objectives and
context are clearly set should allow making sense of
network structures that deviate from random graphs, an
analysis rendered difficult if we look at the whole indus-
try, which is a recognized mix of many high-technology
fields and markets. This complexity has recently been
shown by Powell et al. (in press). The effectiveness
of network visualization techniques also depends on
network size. Mainly gross topology is captured with
the representation of the alliance network in the whole
biotechnology industry whereas the analysis of a seg-
ment of this industry can focus on detailed elements of
the graph structure (Powell et al., in press).
The biotechnology industry is one of the most
competitive and knowledge-intensive sectors in the
economy, driven by an increasingly powerful array of
enabling technologies. While alliances in the biotech-
nology industry have been under academic study for
more than a decade, it is only in the last 6 years
(1998–today) that their number has increased to a
1 Antibodies are complex protein-based molecules.
high level (Filson and Morales, 2004), with over 1200
alliances in 2000 only (Source: Recombinant Capi-
tal). Moreover, the alliances activity now clearly dom-
inates the mergers and acquisitions activity (M&A),
favouring specialization between firms versus integra-
tion within a firm. The data on global M&A activ-
ity from 1996 to 2001 show indeed that M&A con-
stitute only 4.5% of all deals in the biotech sector
(Sources: Signal Magazine, ITIS Project, Develop-
ment Center for Biotechnology, 2002) and that M&A
activity in 2002 was significantly down compared
to 2001 (Source: PricewaterhouseCoopers Securities,
Inc., 2003). The year 1998 also corresponds to an
inflection point, where alliances between biotech com-
panies (biotech–biotech) are more important in numer-
ical terms than alliances between biotech and phar-
maceutical companies (biotech–pharma) (Filson and
Morales, 2004). Until 1997, biotech–biotech alliances
had been an insignificant category. The period where
the rise of “markets for technology” (Arora et al., 2001)
on which smaller high tech firms supply specialized
technology to large established companies may be giv-
ing way to new features in alliance strategy and struc-
ture, reflecting increasing biotech strategic autonomy.
Previous studies in the biotech or health sector have
concentrated mostly on alliances formed before 1998
and on biotech–pharma alliances.
Consequently, we shall consider in this work the
evolution of real alliances maps in the antibody field
from January 1990 to February 2004 in order to study
the underlying dynamical processes leading to the
structure and topology of this defined segment of the
biotechnology industry, with particular emphasis on the
1998–2004 period. Our empirical analysis points out
clearly preferential attachment to central actors and
suggests that preferential attachment to firms is not
linked to their age, as in network models (Barabàsi and
Albert, 1999), but rather to the value of their core com-
petencies that will eventually decay. This implies that
the topology and evolution of complex systems heavily
leverage on the innovation characteristics and product
complexity of the field and institutions within it. The
scale-free nature of the collaboration network in the
biotechnology industry has recently been pointed out
by Powell et al. (in press) by inspecting network degree
distributions over the 1988–1999 period. In agreement
with his work, the distribution of the degree of vertices
(number of collaborations) of the antibody alliance net-
 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475
work was observed in this study to be of a power law
form. In addition, we find that the antibody network
displays clustering and small path length as well, indi-
cating its small-world character.
In this study, in order to provide a full statistical
analysis of several average properties such as path
length and network diameter as well as a complete
characterization of the scale-free properties of the anti-
body network, we analyze these properties for dif-
ferent time snapshots of the antibody alliances maps.
We observe that these properties are not stationary in
time and that scaling exponents may vary in agreement
with the fitter-get-richer hypothesis (firms with cutting-
edge technology in this study) proposed recently by
Bianconi and Barabàsi (2001) rather than the rich-get-
richer model for preferential attachment of Barabàsi
and Albert (1999).
The present study should help model the co-
evolution of technological change and network struc-
ture in the biotechnology industry as well as understand
to what extent hybrid forms of inter-firm collaboration
are successful modes of organization. Furthermore, this
work shows how useful it is to take into account net-
work structure as well as a number of measures within
the bounded context of temporal subsets: differences
in network topology and properties within each period
should have predictive consequences for firms within
an industrial sector and across different innovative/
economic contexts and the relative duration of clusters.
The comparative study of real-world networks from
different areas of sciences can also highlight univer-
sal properties and help the mathematical developments
that reproduce those properties. The paper is organized
as follows.
In Section 2, we describe the methodology and soft-
ware used in this study.
In Section 3, we analyze the empirical data on the
structure of the network and map the network dynam-
ics of the field over the 1990–2004 period. We describe
some of the features we believe characterize the evolv-
ing networked system. These observed properties, such
as degree centrality and path lengths, are then measured
statistically throughout the whole period and at differ-
ent time sets. The real-world network is compared to
the mathematical modelling of networks, including the
small-world (SW) and preferential attachment models.
Section 4 is devoted to a detailed discussion of the
co-evolution of innovation and network structure and
1459
their effects on system behaviour. We also compare the
results to what is known about the structure of net-
works of different types in the real-world to determine
whether our study provides evidence that the anti-
body network, or alliances networks, displays intrinsic
properties or generic organizing principles encoded in
the topology of all complex networks, as suggested
by Albert and Barabàsi (2002) and Newman (2003).
Finally, in Section 5, we draw our conclusions and per-
spectives.
2. Methods
Because, social networks actors, such as alliances,
are in most studies concrete and observable, we rely on
inductive network analysis as well as statistical models.
We therefore combine observation with application of
network algorithms (for data analytic strategies used in
research studies of social networks, see Brieger, 2004).
We rely also on field research that has allowed us first
hand observation into the specific resources that pro-
mote business success in the particular segment looked
at.
To study the growth of the evolving network, we
need explicit temporal and spatial boundaries. Network
analysts have formulated the problem of spatial bound-
ary specification (Lauman et al., 1983). Few network
studies however have been explicit in specifying the
rules of inclusion adopted. Fombrun (1982) argues that
the solution to the boundary-setting problem should be
based on the objectives of the research. In the biotech-
nology industry, the high rate of entry and exit (Barley
et al., 1992) adds to the complexity of defining bound-
aries. Prior research there has employed two strategies.
Stuart et al. (1999) have studied the human diagnostics
and therapeutics sector while Powell et al. (2002) have
restricted their study to human therapeutics between
1988 and 1999 and visualized various stages of the
network. It appears to be particularly problematic to
identify significant topological and dynamical patterns
in such visualization models because of the high den-
sity of the underlying network.
Barley et al. (1992), Amburgey et al. (1996),
Walker et al. (1997), and Silverman and Baum (2002)
have adopted a second definition strategy that empha-
sizes ‘core technology/knowledge’ as the key defin-
ing characteristic of an industry’s boundary. Soh and
1460 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475
Roberts (2003) suggested that the evolution of inter-
organizational networks is interdependent with the
technical sub-fields they were created to control and
therefore restricted their analysis to the data commu-
nications industry using four SIC codes. Robinson and
Stuart (2002), in their study of financial contracting in
biotech strategic alliances, also intentionally narrowed
their empirical focus to alliances for genomics-related
research. They perceived that they would thus be able to
“explore reasons why different pairs of clients and tar-
gets arrive at distinct solutions to essentially the same
contracting problem and how these solutions depend
on the characteristics of the firms in question”. More-
over, the importance of the technological determinants
of the structural evolution of the network of collabo-
rative agreements in the pharmaceutical industry was
demonstrated by Orsenigo et al. (2001). For Orsenigo
et al., one technological wave follows another and is
induced by technological breakthroughs that lead to the
entry of new firms, which act as specialized technol-
ogy ‘originators’. The monoclonal antibody segment
was identified as one of the technological waves. We
have therefore adopted the second definition strategy,
which gives a consistent subset of the biotech industry,
the antibody field, and is more adapted to visualiza-
tion and the scope of the paper. The definitional focus
for the inclusion of actors, as defined by Conway and
Steward (1998) is based on the actor’s participation in
the specified exchange.
The analysis is based on a unique collaborative
agreement dataset built by supplementing SDC Plat-
inum (Securities Data Company’s online databases of
financial transactions) from Thompson Financials pro-
vided by the LEREPS (University Research Centre
in Toulouse, France) with specialized Internet sites
(Biospace, companies sites), news media, and annual
reports (SEC files). Our sample was created by per-
forming a keyword search on the alliance database
to identify antibody-related deals. The sample covers
739 alliances carried out by 557 firms (privately held
and publicly traded) and institutions over the 1987 to
February 2004 period. The database provides infor-
mation on the basic contractual terms in each alliance
including heterogeneity in alliance type (equity, joint
venture, R&D, licensing, manufacturing, marketing)
which are not mutually exclusive in a contract, a brief
deal description, geographical origin of firms, the fund-
ing committed when available, and date of signing.
Table 1
The collaborative agreement dataset
% of total agreements
Supply 2
Joint venture 5
Royalties 13
Manufacturing 16
Marketing 31
Licensing 53
R&D 72
Table 1 summarizes the broad characteristics of the
overall dataset. Mergers and acquisitions are not con-
sidered.
A network is a set of vertices (nodes) connected by
edges (links), representing individuals and the inter-
actions among them, respectively. This longitudinal
study focuses here primarily on networks with vertices
(firms) differentiated only by the name of the company
(unipartite representation) and a single type of edge,
the collaboration. This real-world network is open and
forms by the continuous addition of new vertices and
connections between vertices to the system. The num-
ber of vertices N (network order) increases throughout
the period examined, representing a total of 557 ver-
tices for the whole period. Network maps with actual
nodes and links were drawn to address primary ques-
tions about network structure and dynamics by using
TETRALOGIE network display program (IRIT, Insti-
tut de Recherche en Informatique, France) for large
network visualization and analysis. A weighted spring
embedder was employed to assign node locations,
using an algorithm developed following the work of
Eades (1984), Fruchterman and Reingold (1991), and
Frick et al. (1994). Spring embedders are based on the
notion that the nodes may be thought of as pulling and
pushing one another. The nodes that represent firms
who are close will pull on each other, while those who
are distant will push one another apart. The algorithm
seeks to find an optimum in which there is minimal
stress on the springs connecting the whole set of nodes.
We are interested in both the process through which the
structure unfolds, and thus a visualization technique
that displays the nature of change that leads to new
states of an evolving network, and the cumulative struc-
ture of the network. Networks evolving in discrete steps
(through the addition of edges and nodes and their dis-
appearance) are composed of sub-networks that exist at
 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475 1461

particular points in time. To develop a dynamic network

visualization approach, we need therefore first to con-
ceptualize how time is encoded in complex networks.
Time can be conceived as having two analytically dis-
tinct forms: discrete and continuous. Discrete rendi-
tions of time consist of cross-sectional snapshots of
the network. Due to research costs and software issues,
we have used, as in most longitudinal network studies,
discrete time and hence focused on the change from one
network state to another.2 We consider only alliances
that are formed, so that a node that does not form
new alliances within a given period may appear iso-
lated (not mapped). However, when we map the whole
period, or 7-years periods, we typically capture past
relations in the network image.3 The network tempo- Fig. 1. Number of new alliances per year in the antibody sector. 2004
ral boundary was defined in this study from Fig. 1, data include January–February only.
which records the total number of alliances per year
in the sector from 1987 to 2004. To capture the mor- ent periods and referenced as CNX-PER-A (period
phology of the antibody network overtime, the two 1990–1996), CNX-PER-B (period 1997–2004), CNX1
distinct 7-year phases identified in Fig. 1 were rep- (period 1990–1992), CNX3 (period 1999–2001),
resented as a series of snapshot network maps (PER- CNX4 (period 2002–2004), with a specific focus on
A and PER-B, corresponding to period 1990–1996 the more recent periods: CNX3 and CNX4. To further
and 1997–2004, respectively). PER-1 corresponds to check the relevance of the data, regular 2, 3, or 4 years
period 1990–1992 in PER-A. We have further ‘sliced’ periods have been drawn (data not shown).
the more recent period PER-B in two periods of
equal size and order (PER-3 and PER-4). In particu-
lar, we have analyzed various snapshots corresponding 3. Empirical results
to the largest connected component4 in the differ-
The alliances are best described by two periods
2
of about 7 years: period 1990–1996 (PER-A) where
An even more compelling dynamic argument would need to use
continuous time analysis but consider relational events have a residue
the number of alliances grows and then declines fol-
that extends beyond their occurrence, determined by knowledge dif- lowed by a rebirth in 1997 (period 1997–2004, PER-B)
fusion curves. Indeed, we are first concerned with new knowledge (Fig. 1).
creation that leads to network emergence and structure, and need to
see when breakthrough events rewire the patterns of links. However, 3.1. Graph structural properties and degree
we also assume that alliances serve as conduits for knowledge whose
dynamics do not necessarily follow the actual duration of individual
distribution
ties. A firm that diffuses its proprietary knowledge should loose pro-
gressively its value as it is given away through alliances and therefore The patterns of network structures in the two peri-
its idiosyncrasy and ability to make alliances. ods, 1990–1996 and 1997–2004, are presented in
3 Many classical studies in econometry look at whether ‘ongo-
Figs. 2 and 3, respectively, and are markedly differ-
ing’ alliances have an impact on the performance of the focal firm.
Because alliance termination date is unavailable for most of the
ent. The key feature that stands out is the variation in
alliances, the imputation of alliance termination dates is a conven- nodes degree: a few nodes have a large number of links.
tional practice in these studies. For example, Stuart (2000) imputed Accordingly, a first step in a detailed characterization
5-year alliance duration for all alliances using a linear depreciating of the antibody network concerns the exploration of
weighing with alliances with an earlier date of formation. Bae and degree correlations. The degree k means the number of
Gargiulo (2003) used a moving window of 5 years of prior alliances,
based on research suggesting that the normal life span for most
edges incident upon a given vertex. Most real networks
alliances is normally no more than 5 years (Kogut, 1988). exhibit preferential attachment, such that the likelihood
4 A component of a graph is a maximal connected sub-graph. of connecting to a node depends on the node’s degree.
1462 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475

Fig. 2. Network topology of the main component in 1990–1996 (CNX-PER-A). Node size in all maps is scaled to standardized network degree
in the total network. The lines in bold between any two institutions indicate the presence of repeated alliances.

Table 2
Correlation between centrality and firm innovation capability (key patent in the field)
Centrality Central actors (country) Key patenta Technology Patent issue date
(normalized)
1.00 Medarex (USA) Lonberg Human Abs by transgenic 1999
mice technology
0.55 Abgenix (USA) Kucherlapati Human Abs by transgenic 2000
mice technology
0.48 Cambridge Antibody Technology (UK) Griffith Human Abs by phage display 1999
0.33 Xoma (USA) Patent estate necessary for the –
practice of antibody phage
display
0.29 Celltech (UK) Boss, Adair Chimeric/humanized Abs 1989, 1996
0.28 Genentech (USA) Cabilly Chimeric/humanized Abs 1989
0.28 Protein Design Labs (USA) Queen Humanized Abs 1996
Centrality scores are computed for the whole period 1990–2004 and expressed relative to the most central organization in the network (Cmax = 1).
Technologies correspond to the ability to make either partially human Abs (chimeric/humanization technology) or fully human Abs (mouse
transgenic and phage display technologies). All companies except Genentech and Xoma are focused on Ab therapeutics.
a Source: Duckworth and Fisken (2002).
 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475
Fig. 3. Network topology of the main component in 1997–2004 (CNX-PER-B). Three hubs, Medx, Abgx, and CAT (numbered 1, 2, and 3,
respectively, in the figure) clearly dominate the network.
The explicit dependence on degree k is a signature of
significant correlations on the nodes’ connectivity. In
Fig. 4, we show the probability P(k) that a given node
has k links to other nodes for the antibody network,
covering the 1990–2004 period. The results obtained
exhibit a clear power law distribution fitted by a k−γ
dependence, with γ ∼ 1.4, that implies the existence
of important correlation properties for the antibody
network. Whereas lower than the theoretical value pre-
dicted by Albert and Barabási’s model of preferential
attachment with γ = 3, this value is in agreement with
the results provided by Powell et al. (in press) with an
equivalent dataset (482 × 482) of all alliances between
biotech firms in the whole industry over a 12-year
period (1988–1998) and a bigger dataset (482 × 2310)
which includes alliances with non-biotech partners.5
5 This result is in agreement with the existence of various scal-
ing exponents in the connectivity distribution revealed by many
1463
Strikingly, we find that the first seven nodes with
highest degree correspond to firms that hold the patents
that are considered key intellectual properties in the
antibody field (Table 2). Intellectual property is the
term used to describe the intangible assets associ-
ated with a company’s technological innovation. We
can briefly summarize the basic properties of the
dynamics of groundbreaking knowledge in the anti-
body field. Work on antibodies as drugs began when
Köhler and Milstein described hybridoma technol-
ogy for generating monoclonal antibodies (mAbs) in
1975. However, therapeutic mAbs did not take off
extensions or modifications of the model that account for more
realistic representation of processes taking place in real-world net-
works. Examples are to make the mean degree change overtime, to
include for aging, rewiring, or an additional mechanism whereby
edges appear or disappear between existing vertices with stochasti-
cally constant but possibly different rates), all processes affecting the
exponent value γ (see, for a review, Newman, 2003).
1464 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475
Fig. 4. Log–log plot of the degree distribution for the antibody net-
work for the whole period. The horizontal axis for each panel is
vertex degree k and the vertical axis is the distribution of degrees,
i.e., the fraction of vertices that have degree equal to k. The degree
distribution decays as a power law, P(k) ∼ k−γ . The upper solid line
corresponds to a simple fit P(k) ∼ k−1.4 The dotted line is the theoret-
ical fit for a probability distribution with exponent γ = 3, as proposed
by the scale free model.
as expected because the non-human (mostly murine)6
molecules generated using this technology did not fare
well in human patients. Lack of efficacy and side
effects led to the development of human-like, chimeric7
then humanized,8 mAbs. Finally, production of fully
human9 mAbs from transgenic mice and phage dis-
play has been possible since the early 1990s though
disputes over the patents for the technologies have
delayed the investigation of this class of mAbs. The
three firms that hold key patents for the generation
of fully human antibodies, Medarex (Medx), Abgenix
(Abgx), and Cambridge Antibody Technology (CAT),
have the highest centrality scores (Table 2).
In-depth analysis of antibody technologies has
demonstrated the movement in the clinic from chimeric
antibodies towards humanized Abs then fully human
6 Murine mAb are entirely derived from mice. Mouse antibodies
with therapeutic potential are relatively easy to obtain, but when used
in humans, have a short half-life and usually elicit a response that
neutralizes the mouse antibody and renders it ineffective for future
therapy.
7 Chimeric mAb: A mAb constructed from variable regions derived
from murine source and constant regions derived from a human
source.
8 Humanized mAb: A mAb constructed with only antigen-binding
regions (also called complementarity-determining regions, or CDRs)
derived from a mouse, and the remainder of the variable regions, and
constant regions, derived from a human source.
9 Human mAb: A fully human mAb derived currently from trans-
genic mice or phage display.
products (Reichert, 2002), and linked also the type and
number (overall product performance) of mAbs enter-
ing clinical studies by year to the sequential technolog-
ical trajectories in the field. For example, humanized
mAbs have been the main source of antibody-based
products entering clinical trials since 1997, with a
steady growth from 1991 to 1997. However, their num-
ber has decreased progressively since year 2000 while
the number of fully human mAbs entering clinical stud-
ies has increased since 1998. Fully human products will
take time to materialize since products need to move
through development phases but it is expected that in
2008 about 17% of antibody sales will derive from fully
human products.10
We find that about 50% of the contracts in
our database have licensing provisions (Table 1).11
Robinson and Stuart (2002) wrote that a large frac-
tion of deals containing licensing provisions reflected
a strong bargaining power of firms in genomics-based
biotech companies, linked to the use of a technology
that was expected to revolutionize the drug discov-
ery process. Because of their high scientific value,
genomics-based biotech companies can thus license
their IP to many other parties. In line with this work,
we find a correlation between key IP and the highest
centrality scores. These actors with a large degree are
in direct contact to many other actors and very active
points and major channels of communication. We have
therefore investigated whether hubs’ key knowledge
was indeed distributed from central actors to other
firms within the network. Hence, within a 7-year time
window PER-B, where central hubs with key IP are
the most influential, with Medx, Abgx, CAT reaching
about 60% of the nodes, we have typified linkages from
the point of view of knowledge flows going from hubs
10 Source: Datamonitor (2003). Datamonitor is a business informa-
tion company specialising in industry analysis.
11 In the network maps, we do not code for the diversity of ties
in terms of the description of the modes of cooperation. This is
due to limitations in the data base and software/visualization tech-
niques utilized and to the overlap of types of relations within a time
window that can also significantly complicate our understanding of
relations. Moreover, certain types of ties are not mutually exclusive
in a contract. Powell (2002), in an effort to code each tie for its pur-
pose, distinguished between R&D, finance, marketing, and licensing
ties but had to collapse multi-stage relationships. He coded them as
commercial ties since these relationships involved a stage in the com-
mercialization process.
 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475 1465

(out degree centrality) or towards hubs (in degree cen-

trality), consistent with migratory knowledge. We have
read each deal text and defined a knowledge flow was
present when a contract required technical/scientific
competency from one of the partner.12 Interestingly,
less than 5% of the linkages formed by hubs involved
no technology flow and most agreements granted the
right to use the technology developed by a hub. We
have found indeed that knowledge diffuses mostly from
nodes with high degree centrality (Medx, Abgx, CAT)
towards other nodes, with out-degree centrality scores
(∼80%) largely dominating in-degree centrality scores
in PER-B.13 The diffusion process occurs rapidly and
12 For example, the following deal text has been typified as an
out-degree centrality link going from a hub (Abgenix) to its partner
(Chiron): “Abgenix, Inc. (Nasdaq: ABGX) today announced that it
has signed a research license and option agreement with Chiron, Inc.
(Chiron) (Nasdaq: CHIR) under which Chiron will use Abgenix’s
XenoMouseTM technology to generate fully human monoclonal anti-
bodies to an undisclosed antigen in the field of autoimmune diseases.
In return, Abgenix will receive a technology access payment and
could receive additional fees and milestone payments plus royalties
on future product sales by Chiron . . . Chiron will be responsible for
product development, manufacturing, and marketing of any products
developed through the collaboration”. We can see here that, though
many activities (e.g. manufacturing and marketing) and modes of
cooperation (e.g. research license and option agreement, royalties)
underlie the link, the alliance clearly leverages on technology. In the
following example, the hub (CAT) takes a license to use the technol-
ogy of its partner (CMS): “Cambridge Antibody Technology (CAT)
and Chromos Molecular Systems, Inc. (CMS) planned to form a
strategic alliance wherein CMS was to license CAT to use its ACE
Systems in the development of protein expressing cell lines for the
commercial manufacture of antibodies and biologics”. This link has
been typified as an in-degree centrality link. The percentages of out-
and in-degree centrality links compared to the total number of links
were then calculated from the database and are reported in the text.
13 As control, we have also looked at the deals made for the whole
period by two biotech firms with key IP on humanized antibod-
ies, Protein Design Labs (PDL) and Genentech (Table 2). PDL
licenses its antibody humanization patents in about 75% of its agree-
ments. Genentech, a unit of Roche (big pharma) and the world
second biotech company, has made cross-licensing agreements with
its competitors (PDL, Celltech) and contributed its humanized mon-
oclonal antibody technology in about 60% of the deals. Genentech
has in-licensed technologies or products in about 30% of the deals.
Genentech has also taken licenses in the phage display (CAT) and
transgenic mice technologies (Abgenix), starting in 1998. Amgen,
also highly central in the field of biotechnology (world first biotech
company) and a competitor of Genentech, is not central in the anti-
body field (degree centrality: 0.04). We have also looked at incumbent
companies with the highest centrality scores in the monoclonal anti-
body field and no key IP. Centocor, a biotech company and affiliate
Fig. 5. Alliances made by central hubs through time. The mean num-
ber of alliances per year is calculated for all central hubs within a
technical category and expressed as a percentage of the number of
alliances of all central hubs within the same period. Access to par-
tially human antibodies precedes access to fully human antibodies.
has a limited time life. For example, in CNX3, ∼80%
of the links are made by Medx, Abgx, CAT (∼60%
by Medx and Abgx). In CNX4 (equivalent network
size and same order of the main component compared
to CNX3), ∼50% of the links are made by Medx,
Abgx, CAT (26% by Medx and Abgx) reaching ∼48%
of the nodes. In-degree centrality scores for the three
main hubs also increase from CNX3 (∼10%) to CNX4
(∼20%), indicating a reversal of knowledge flows. IP
and degree centrality data therefore demonstrate that
IP is an important firm attribute that shapes the flow of
knowledge.
For those central nodes that hold key competencies
in the different technological areas, we have measured
the degree connectivity as a function of time t from
1990 to 2004. The data are reported in Fig. 5, where
it is possible to distinguish different alliance dynami-
cal regimes corresponding to the consecutive advents
of the distinct technologies, in agreement with the
results reported above. The data show that preferen-
tial attachment to central hubs is limited by the shift of
relations towards new technologies. Successive waves
of new technologies shape the overall evolution of the
network.
Central nodes also acquire edges at different rates
(Fig. 6). Hubs in the transgenic group increase their
of Johnson and Johnson (big pharma) with a high centrality score
(0.18), in-licenses about 70% of its deals. For big pharmas, with
high centrality scores such as Merck (0.2) and Abbott (0.18), we
found that about 70–80% of the deals were in-licensing agreements
that involved research and/or product development.
1466 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475
Fig. 6. Rate of linkage is affected by technological competence of
central hubs. The mean number of alliances per year is calculated for
all central hubs within a technical category.
degree faster and within a shorter period than those
in the phage display group. Key hubs in the human-
ized/chimeric group have a much lower rate of linkage.
Thus nodes have an intrinsic ability to compete for
edges at the expense of other nodes that is linked to
the type of technologies in the field. Medx and Abgx
have the highest degree and rate of linkage because
they have introduced a radical innovation that requires
no complex engineering of the mAbs and eliminates
the problems of earlier technologies. Degree centrality
and rate of linkage are therefore clearly linked to the
worth of technologies possessed by a limited number of
companies (a duopoly in the field of transgenic mice).
Betweenness centrality was also measured on each
vertex along the shortest pathways by using the algo-
rithm introduced by Brandes (2001). If we consider
C(i,j) as the number of geodesic pathways between
a pair of vertices (i,j) and Cz (i,j) as the number of
geodesic pathways between i and j running through
vertex z, then the betweenness centrality BC of node
z is defined as the accumulated sum of fraction
gz (i,j) = Cz (i,j)/C(i,j) over all ordered pairs for which a
geodesic path exists. We have calculated betweenness
centrality distribution and the exponent η for period
1990–2004 (Goh et al., 2002). Betweenness centrality,
as degree centrality, displays a power law distribu-
tion P(g) ∼ g−η with a few hubs having high centrality
scores with exponent η ∼ 2.2. The betweenness of a
node is also highly correlated to its degree connectivity
k (Fig. 7). These results are in agreement with previ-
ous work on other real networks such as the Internet
(Vasquez et al., 2002).
Fig. 7. Correlation between node degree k and betweenness central-
ity BC. The full line corresponds to the predicted behaviour BC ∼ k.
Firms with high degree are hence better positioned to transmit and
receive information.
Closeness centrality is the normed reciprocal of the
sum of the geodesic distance of each actor to all oth-
ers and therefore an index of expected time until arrival
for a given node of whatever is flowing through the net-
work (Borgatti, 1995). In the antibody network, many
nodes show similar levels of closeness centrality, with
no evidence of a power law behaviour. The mean close-
ness centrality index is 0.135 ± 0.082, very close to the
index for a random network of the same size and order
(0.134 ± 0.042), suggesting therefore rapid global dif-
fusion. We also find that the first 7 years (PER-A) show
more ‘farness’ between actors than the next 7 years
(PER-B), with closeness centrality scores of 0.093 and
0.155, respectively, in agreement with the very differ-
ent network topologies observed for these two periods
(Figs. 2 and 3).
Therefore, out-degree, betweenness-, and close-
ness-, centrality results can be interpreted as indicating
power for hubs with key IP, together with fast overall
diffusion of knowledge flows from central players.
Since the technological determinants of the struc-
tural evolution of the network of collaborative agree-
ments appear important (Fig. 5) and affect product
performance (Reichert, 2002), we expect alliances to
have an impact on overall product performance. Indeed,
Fig. 8 shows the high correlation between the num-
ber of alliances and the number of products in the
pipeline14 for the seven major pharmaceutical markets
in the world.
14 Source: Pharmaprojects database from Thomson Financials.
 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475
Fig. 8. Correlation between alliance formation and product performance (number of products in the pipeline from preclinical to phase III clinical
trials) in the largest pharmaceutical markets, the G7 nations.
In order to inspect further the antibody network
dynamics, we measured the turn-over of nodes into the
maps. The largest contribution to network growth is
given by the appearance of new nodes. Specifically,
about 75% of new entrants in one phase will not main-
tain themselves in the next phase and 74.5 ± 6.2% in a
yearly analysis over period 1990–2004. Only 2.7% of
the firms are present throughout the whole 1990–2004
period and among the firms that outlast one period,
only about one out of five shows an increasing rate
of alliance formation. This clearly points out that the
antibody network growth is not driven by the need
of redundancy wiring among already existing nodes,
in agreement with the non-cumulative technological
dynamics observed.
We have decided to focus on the main component of
very recent phases, CNX3 and CNX4, to demonstrate
that shifts in network structure occur periodically, in
agreement with the technological evolution of the field.
The importance of the technological determinants of
the structural evolution of the alliance network can be
appreciated by looking at Figs. 9 and 10.
Big pharmaceutical and biotech firms are the first
to access the technology (through alliances to central
hubs). They are not new entrants and money gives them
clearly a first mover advantage on cutting-edge tech-
nologies. In a second step, central hubs meet newest
people in terms of innovation and entry in the network.
These results indicate that most of the market share
will be distributed among key innovators (central hubs)
1467
and big incumbents (biotechs or pharmaceutical com-
panies) while a host of smaller competitors will find
market entry more difficult.
We have shown that a clear-cut characterization of
the topological properties of the network is given by
the degree distribution P(k). We report here the dis-
tribution for the different snapshots of the antibody
network. Though the order of the network is relatively
small (557 nodes for the whole network and 128 for
the smallest data subset, PER-3), degree distribution is
consistent with power law for all periods examined. In
Figs. 11 and 12, we show that though the degree distri-
bution decays indeed as a power law, it is different for
PER-A and PER-B, respectively. A few nodes that have
links in excess to that predicted by a power law appear
in PER-B. The presence of such nodes is a generic trait
of competitive systems (Bianconi and Barabàsi, 2001).
Accordingly, the different values for exponent γ show
that multiscaling occurs in the evolving network, with a
markedly low γ in PER-3 (Table 3). Therefore, though
Table 3
Scaling exponents in the connectivity distribution as a function of
time
Period γ Component
PER-A 1.73
PER-B 1.18
PER-1 1.70
PER-3 1.02
PER-4 1.5
1468 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475

Fig. 9. CNX3 network structure: This period is clearly dominated by three hubs, Medx, Abgx, and CAT (numbered 1, 2, and 3, respectively,
in the figure). These firms have introduced technological breakthroughs in the monoclonal antibodies field by allowing the generation of fully
human antibodies, Abgx and Medx through the use of transgenic mice technology and CAT through the use of phage display technology. The
deal texts in the database show that innovation is mostly transferred from hubs (out-degree centrality) towards peripheral actors or interme-
diaries, that are often big pharmaceutical companies (Merck, Novartis, Abbott, Pfizer, Smithkline Beecham, Eli Lilly, AstraZeneca, Schering,
Novo Nordisk, etc.) or incumbent biotechs (e.g., Amgen (Immunex), Genentech (Roche), Human Genome Sciences, Centocor (Johnson and
Johnson), Millenium, Biogen (Idec), Chiron, Curagen, Celltech, Protein Design Labs, etc.). We have represented these firms as black dots in
the figure.

a low γ value may be due to many factors (see footnote
5), high variation in γ value occurs when three nodes
with key IP dominate the network (PER-3). The γ value
increases in PER-4, concomitantly to the three actors’
loss of centrality.
3.2. Small-world properties
Average path length, clustering coefficient and
degree distribution are three robust measures of net-
works topology that are utilized in the study of the three
main classes of modelling paradigms: random graphs,
small-world and scale-free models (for a review, see
Albert and Barabàsi, 2002; Dorogovtsev and Mendes,
2001; Newman, 2003). While we focus here on average
path length and clustering coefficient, other quanti-
ties such as diameter have also been tested against our
database.
The antibody network also displays the small-world
property, with clustering as well as small path length.
The Watts and Strogatz Model (1998) interpolates
between an ordered lattice and a random graph. We find
an average path length for the whole network l = 4.25
and the clustering coefficient C = 0.844, close to the
coefficient for a ring lattice and orders of magnitude
higher than Crand = 0.002 for N = 557 corresponding to
 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475 1469

Fig. 10. CNX4 network structure: This period is characterized by a very net change in network structure. Abgx has now only two links to the main
component. A very cohesive sub-segment appears in the network. It reflects the development of the ‘phage’ sector and its strongly competitive
nature (extension now around three hubs instead of one: CAT, Dyax, and Xoma). Medx, Abgx, CAT, Dyax, and Xoma are numbered 1, 2, 3,
4, and 5, respectively, in the figure. The number of path flows between Medx and CAT has diminished considerably. New biotech companies
have entered the network on these paths between CAT and Medx, such as Chromos, Xencor, Micromet, Diversa, and Xerion, which have been
represented as black dots in the figure. These firms bring their core competency. For example, Chromos enters the antibody field with a unique and
proprietary technology using artificial chromosomes. Micromet has expertise in single chain antibody technology and a novel class of antibody
derivatives called bi-specific T-cell engagers. Xencor has a patented Protein Design Automation technology that allows structure-based antibody
engineering. Xerion has expertise in target validation and characterization. Diversa brings directed evolution methods to the antibody field.

a random graph of the same order and average degree.
Measures for the different sub-graphs are given in
Table 4.
The ratio of the clustering coefficient of many real
networks of different orders and their average degree
appears to be independent of network order (Albert
and Barabàsi, 2002). Accordingly, the antibody net-
work does not follow the prediction of random graphs
since its clustering coefficients are clearly not influ-
enced by network order (Table 4).
The diameter of a graph is the largest geodesic dis-
tance between any pair of nodes in a network. Strictly
speaking, it is defined as the mean diameter of its
isolated clusters. In the snapshots analyzed, the diam-
eter of the different graphs equals the diameter of the
main component. The diameter of the whole network
is smaller than the diameter of random graphs with the
same order (Table 4). This is also particularly true for
CNX3 with a 42% reduction in diameter, an indication
of the non-random aspects of the topology of real net-
works. We find a similar trend of the data when we cal-
culate the average path length, with again a 43% reduc-
tion in average path length for CNX-PER-B and a 38%
reduction in average path length for CNX3 compared
to data for random networks of the same size and order.
Importantly, the diameter in the 1997–2004 (CNX-
1470 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475

distance in CNX-PER-B to be 1.61 times smaller than

Fig. 11. Log–log plot of the degree distribution for the antibody
network for PER-A.
the mean geodesic distance calculated in CNX-PER-A.
Correspondingly, the mean geodesic distance in CNX3
is 1.73 times smaller than the mean geodesic distance
calculated in CNX1, a period comparable to CNX3
but within PER-A. Short average path lengths can only
increase the speed at which knowledge diffuses. Struc-
tures, in which very short average distances dominate,
as in CNX3 and CNX-PER-B, indicate short-run distri-
bution properties. The highly cliquish structures with
short mean geodesic distances that are produced in
the last 7 years do not require geographical proximity.
CNX4, for example, though geographically not random
is highly global (data not shown).

4. Discussion

Exchange mechanisms such as markets

Fig. 12. Log–log plot of the degree distribution for the antibody
network for PER-B. The three firms with key IP rights for this period
accrue most of the edges, leading to a decreased γ component, when
compared to Fig. 11.
PER-B) period is 2.25 times smaller than the diameter
calculated for the 1990–1996 period (CNX-PER-A),
demonstrating the importance of capturing network’s
time evolution. Likewise, we find the mean geodesic
(Hagedoorn, 1993) are important in that they
allow the creation and selection of complementary
structures that produce new knowledge, goods, and
processes. Economists have yet had little interest in
the communication structures of a market. However,
timeless constructs such as the production function
perspective of ‘classical’ economists miss the impor-
tance of the network structure of connections that
actually defines and create added value. Our research
shows that complex network theory and empirical
analysis can be useful in economics to offer a different
analytical perspective in addressing the spatial dimen-
sions as well as the dynamics of economic behaviour.
Network theory in particular recognizes the core role
of innovation, both technological and organizational.

Table 4
Basic statistics for the undirected antibody network at different time periods
n nmain m C Crand l lrand d drand
CNX-PER-Tot 557 414 739 0.844 0.002 4.25 6.40 10 15
CNX-PER-A 348 246 381 0.839 0.003 5.65 6.36 18 15
CNX-PER-B 278 202 333 0.869 0.004 3.51 6.13 8 14
CNX1 194 90 186 0.868 0.006 5.79 7.07 16 15
CNX3 128 99 140 0.886 0.009 3.34 5.38 7 12
CNX4 150 97 144 0.877 0.006 4.32 6 10 13
The properties measured are: network order n, order of the main component nmain, size m, the average path length l, the clustering coefficient C,
and the diameter d. For a comparison we have included the average path length lrand , the clustering coefficient Crand , and the diameter drand of a
random graph of same size and order.
 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475
In a random network, firms would be differenti-
ated by normally distributed variations. We have seen
that the antibody network is scale-free. The actual
distribution of node sizes follows a power law as
observed already in many systems (Albert et al., 1999;
Barabàsi et al., 2002; Faloutsos et al., 1999; Jeong
et al., 2000; Redner, 1998). The antibody network is
therefore driven by assumptions of growth and pref-
erential attachment in accordance with the work of
Barabàsi and Albert (1999). Power law alone demon-
strates inequality between firms. At some times indeed,
star shape structures develop where near monopoly sit-
uations are achieved whereby most connections are
mediated by only three hubs. Though firms obviously
do not have perfect information about each other, it is
therefore also true that they are not identical and that
it matters in economy. Correlation between firms’ key
IP and high degree centrality, as well as a dynamic
examination of network structure, demonstrates the
strong linkage between innovation and emergence of
network structures, supporting particularly recent evo-
lutions regarding the scale-free model. Indeed, of par-
ticular interest for this study is the paper of Adamic
and Huberman (2000), which suggests that the degree
of vertices is also a function of their intrinsic worth.
Bianconi and Barabàsi (2001) have proposed an exten-
sion of the Barabàsi–Albert model that includes the
worth of the vertices and thus its ability to multi-
ply the attachment probability, leading to a hypothe-
sis of “fitter-gets-richer” overtaking the rich-get-richer
explanation for preferential attachment. In this model,
a relatively young node can accrue edges at a high rate
if it has a high fitness parameter, as observed in the
antibody network. The connectivity exponent is given
by γ = 1/β + 1. The dynamic exponent β is bounded
and function of node fitness. For γ = 3, all fitnesses are
equal as predicted by the scale-free model. An interest-
ing aspect of the antibody network is the appearance of
a few nodes with degree in excess to that predicted by
a power law. These central hubs appear as a horizontal
line with large k on the log–log plot of Fig. 4. Notably,
we find these features to be more acute in period
1997–2004 than in 1990–1996, with an even lower γ
in 1999–2001 and a clearly uneven degree distribu-
tion with three vertices (highest fitness: Medx, Abgx,
CAT) accruing most of the edges (as seen clearly also
in Fig. 9). Abgx, Medx, and CAT, which have the high-
est centrality scores, make 80% of the links in CNX3,
1471
demonstrating ‘tri-poly’ dominance of the market.
Degree distribution is again more uniformly distributed
in 2002–2004 with higher γ. Moreover, when we look
at the direction of links in terms of knowledge flows,
we expect the worth of central firms to be transmit-
ted to the market. Accordingly, hubs with key IP have
high out-degree centrality scores. Data on hubs turn-
over of alliances also show clear technological phases
and their sequential importance to the field, thereby
demonstrating that innovation is asymmetrically dis-
tributed in time. Indeed, we do not have the correlation
between age and the degree of vertices of the Bàrabasi
and Albert model: vertices of the same age do not have
the same degree and earliest vertices (e.g., Genentech,
founded in 1970, and early entrant in the antibody net-
work), do not have the highest degree (Abgx, founded
in 1996, appears as a new node in the network in 1997
and has higher degree). These data therefore support
the view that the worth of nodes is a major feature of
the scale-free model: nodes with different fitness values
that not only evolve but also age through time compete
for links, and would explain multiscaling in the dynam-
ical evolution of the system, in agreement with the work
of Bianconi and Barabàsi (2001).
Degree centrality of hubs thus represent dominant
technologies (key IP) and leads to successive techno-
logical cycles that measure the distribution and dura-
tion of value (Fig. 5), akin to the cycles of creative
destruction in Schumpeterian theory. These cycles have
besides an impact on productivity: therapeutic anti-
bodies on the market are first chimeric, to be replaced
by humanized, and then fully human antibodies. Net-
works of connections are therefore innovation but also
production systems that influence global product per-
formance, as seen in Fig. 8. The level of turn-over of
dominant hubs signals the repositioning of value dis-
tribution and the emergence of competitive networks.
Hubs and more generally node turn-over seem crucial
to a well functioning economic system. Interestingly,
the rate of alliance formation of hubs is quite different
from one technological phase to another and corre-
sponds to different network structures and technolog-
ical capabilities (Fig. 6). It is nevertheless significant
that considering nodes with a wide-range of distribu-
tion in growth rates still yields a power law distribution
in node degree.
Networks cannot be fully connected or maximally
efficient. Even when connectivity increases, as in scale-
1472 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475
free networks, it remains incomplete. Density in the
antibody network is 0.004 for the total period, 0.017
in CNX3 when the system is dominated by three hubs,
and 0.013 in CNX4. Typically, therefore, a firm inter-
acts with a small proportion of the population of firms.
These results also reflect naturally that firms are not
random in making connections. We have seen that a
node can evolve into a hub in a particular market and
thus has monopoly power if it possesses attributes con-
sidered key in the market. We therefore do not reach
assumptions of neoclassical economics where perfectly
competitive firms and fully informed and connected
consumers constitute a decentralised system. Indeed,
our scale-free network forms core–periphery hierar-
chies that are unstable since the probability valuable
competencies remain valuable to an industry segment
for a long time is very small, as seen through hubs
turn-over. Moreover, we do not find a fixed set of con-
nections that is needed if logical deductions concerning
equilibrium outcomes are sought, as in neoclassical
economic theorizing based upon constrained optimiza-
tion (Foster, 2004).
We have also found that the antibody network dis-
plays the main features that define small-world (SW)
networks. It has a large clustering coefficient, much
larger than the one expected from a random network
of similar size and average degree and a surprisingly
short geodesic path distance. These results are in agree-
ment with recent work of Newman (2001) and Barabàsi
et al. (2002) on collaboration networks in several fields
of research. Other properties deviate from theory.
In mathematical terms, we have a more complex sit-
uation, including finding features of both SW and scale-
free models, parameters varying in time space such as
density, path lengths, nodes turn-over, attributes, etc.
Also, average path length does not increase with system
size as predicted by all network models. Rather, path
length and network diameter reflect specific contingen-
cies of the field, advances in molecular engineering
techniques and their subsequent diffusion.
In economic terms, as already stated, our results
show different phases of growth, each phase hav-
ing a particular network structure. Some hubs have
‘monopoly’ power and the antibody network, as a hub-
dominated network, is highly cohesive and presents a
SW structure. Short path lengths and high cliquishness
facilitate knowledge diffusion from hubs and aggregate
knowledge growth. Impressively, hubs mean geodesic
distance to about 100 firms is only roughly three steps in
CNX3. The system then gradually suffers from connec-
tive breakdown15 (knowledge has diffused and techno-
logical obsolescence occurs).
In the SW model, short cuts allow passage from a
locally ordered structure to a SW structure and finally
a random graph. SW theory postulates that local coher-
ence and therefore cliquishness falls with the introduc-
tion of random links. In the antibody network, small
average path lengths are not brought by random con-
nections. They rather reflect the need for all firms
to be close in technology space. Indeed we find that
paths are even shorter than predicted by random mod-
els. After knowledge has diffused (CNX3), network
structure can relax (CNX4), reflect technological dif-
ferentiation and obsolescence, and hence tend towards
a more random structure: cliquishness decreases and
the network diameter and mean path length become
closer to that of a random network. Therefore, the anti-
body network structure does not lie exactly between the
nearest-neighbour network and the random network,
though we find, in agreement with the work of Cowan
et al. (2002) and Cowan and Jonard (2004) on small-
worlds, conditions that are favourable for knowledge
creation, diffusion, and differentiation. In agreement
again with the model of Cowan et al. (2002), firms have
a knowledge endowment, characterized by an amount
and a type, and will loose their unique features as they
work together to innovate and learn from each other
in the process. Importantly also, Ozman (2003), in his
network evolution model, has emphasized that agents
can only build on their existing knowledge in decreas-
ing proportion through time unless they make a radical
innovation in one of their knowledge categories. We
find therefore a more intricate situation with subtle
dynamics, where not only knowledge differentiation
(firm level), and therefore variety (network level), but
also global network knowledge and cohesion are key
parameters. The whole network structure is utilized,
changed, rebuilt, as changes in firm discrete innova-
tion and joint innovation occur.
The basic premises that there are at least two kinds
of innovation, radical and incremental, and that the time
distribution of radical innovations is asymmetric are not
new in economics (Dosi, 1988; Freeman, 1983; Men-
15 Density and hub degree centrality decrease, mean path length,
and diameter increase.
 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475
sch, 1979; Schumpeter, 1934). As Olsson summarized
(2001), once a radical innovation is accepted, a period
of normal incremental innovations takes place along
the trajectories characterized by the new paradigm.
Therefore, the finding in this study that discrete radical
innovations, defined as opening up new fields of
technological opportunities, with a new outlook on
problems and way to solve them, have a major effect
on network structure are in agreement with these
premises. Accordingly also, in our study, radical inno-
vations are followed by their diffusion and incremental
innovations.
Our findings also converge with recently published
results, such as in the biotechnology field, preferential
attachment with low γ and high nodes turn-over (Pow-
ell et al., 2004). White et al. (2004) have written that
“Rather than a static structure of hierarchical cohesion,
this science-based field has a preference for novelty.
The most central firms search for new sources of inno-
vation on the periphery and pull the new entrants into
the center”. Kogut (2000) also considers that a strong
IP, control of bottleneck resources, as well as rules of
cooperation will lead to central players with no isolates.
For him again, specialization and variety generation,
though antithetical within the firm, define comple-
ments in a network. The market is then an organization
of discrete entities (firms) following different visions.
Interestingly also, Ahuja (2000) has questioned the
effectiveness of knowledge flows through alliance net-
works. Indirect and direct ties though apparently both
beneficial do not provide the same benefits and thus
cannot be substituted; indirect ties allow information
spill-over only while direct ties allow both information
spill-over and resource sharing.
5. Conclusion
A general feature of network studies is that they
often view networks as static graphs. We have demon-
strated that many discriminating quantities used to
characterize the antibody network are time-dependent.
The measurements vary not only within the net-
work studied here but also show very different trends
between networks (Barabàsi et al., 2002), indicating
the importance not only of studying generic features
present in complex networks but also specific ones that
may be characteristic of a developing industry or sector
1473
for example. We have shown that the antibody network
exhibits a scale-free topology and that resource con-
straints such as innovation capacity of firms influence
its growth and structure, cliquishness, and path lengths,
pointing also to the importance of considering in net-
work studies not only the attributes of the links but
also of the nodes and their interdependence. The under-
standing of macro networks dynamics and structures
have potentially important applications. Firms need to
use, contribute to, and position themselves optimally in
networks that are modelled by global sustained innova-
tion and radical change. The results reported here could
be relevant for the development of firms networking
strategy aligned with firm and network technological
capabilities and could have implications for the theory
and management of firm boundary decisions. However,
other characteristics still need to be looked at. The anti-
body network is a directed network and engages in
contracts that entail many forms of cooperation, more
or less pervasive to firm or market, as described by
Hagedoorn (1993) and Badaracco (1991). Some of the
current limitations of the understanding of complex
economic systems cannot be overcome until the devel-
opment of suitable and detailed, evolutive, data on firms
and contracts, as well as adequate software, is available.
Importantly, a proper economic and strategic con-
sideration of the results would need further work at the
firm-level and (ego) network-level, derived from the
perspectives opened by network sociology in social
and organizational contexts (Ahuja, 2000; Robinson
and Stuart, undated; Bae and Gargiulo, 2003; Burt,
1992; Coleman, 1994; Owen-Smith and Powell, 2003;
Powell et al., in press; Simsek et al., 2003). Indeed,
many recent evaluation studies have been motivated
by Burt theory on structural holes and/or Coleman
theory on closure. Finally, though we have correlated
innovation and global network performance, firm- and
egonet-level performances have yet to be addressed.
Work on organizations’ network positions has indeed
shown that they can be a powerful source of competitive
advantage. For example, high status organizations gain
timely access to information, referrals and resources
(Powell et al., 1996), opportunities to broker discon-
nected partners (Burt, 1992) and are able to set higher
prices, earn higher revenue and achieve greater market
share (Podolny, 1993; Stuart et al., 1999). Indeed, deci-
sion makers rely on status attributions to make infer-
ences about the quality of organizations and reduce
1474 B. Gay, B. Dousset / Research Policy 34 (2005) 1457–1475

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Acknowledgement
Finance, vol. 354. Society for Computational Economics, Paper
Presented at the 6th Workshop on Economics with Heterogenous
We thank Claude Dupuy (GRES-LEREPS) for let- Interacting Agents (WEHIA), Maastricht.
ting us access databases and software and for helpful Cowan, R., Jonard, N., 2004. Network structure and the diffusion of
comments. knowledge. Journal of Economic Dynamics and Control 28 (8),
1557–1575.
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