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Strategic make-or-buy decisions in growth-stage biopharma firms: theory tested, behavior observed, and the gap between them
Dissertation   Open access

Strategic make-or-buy decisions in growth-stage biopharma firms: theory tested, behavior observed, and the gap between them

Leonie Naa Ayorkor Sowah
Doctor of Business Administration (D.B.A.), Drexel University
May 2026
DOI:
https://doi.org/10.17918/00011487
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Abstract

Organizational behavior Biopharmaceutical industry Companion diagnostics Diagnostic capability development Make-or-buy decisions SEC Form 10-K Strategic management theory
Growth-stage biopharmaceutical firms face strategic make-or-buy decisions that implicate capital commitment, regulatory risk, and competitive positioning. This dissertation examines the drivers of these decisions, with particular attention to diagnostic capability development, through a mixed-methods panel analysis of 85 firms observed across 490 company-years (fiscal years 2020 through 2025). The analytical framework integrates eight strategic management theories: Transaction Cost Economics, the Resource-Based View, Dynamic Capabilities Theory, the Knowledge-Based View, Organizational Capabilities, Agency Theory, Real Options Theory, and the Behavioral Theory of the Firm. These theories are operationalized through a 51-code research codebook applied to SEC Form 10-K annual filings, complemented by deterministic keyword measurement across seven categories and behavioral extraction of financial and transaction data. Primary capability-constraint inferences are drawn from Specification 2 (constraint dummies with theory-score controls); Specification 1, which includes the Acquisition Capability composite among its predictors of acquisition count, is reported as a descriptive companion specification rather than an inferential test (see Section 4.6.5). The empirical findings characterize 85 biopharma firms over the 2020-2025 panel; replication in other knowledge-intensive sectors is identified as future research. The empirical analysis is structured around five key propositions. First, capability-seeking frameworks (the Knowledge-Based View and Organizational Capabilities) predict acquisition behavior more strongly than governance frameworks (Transaction Cost Economics and the Resource-Based View). Second, a full eight-theory specification fits the data better than either two-theory alternative on every metric, indicating that biopharma boundary decisions are genuinely multi-theoretic and cannot be resolved within any single theoretical family. Third, firms cluster into four strategic archetypes (Low Engagement, TCE/RBV Dominant, Balanced High, and Capability Focused), with acquisition rates rising steadily across the four. Fourth, theoretical engagement at year t predicts acquisition activity at year t+1, establishing temporal precedence of language over behavior. Fifth, companion diagnostic sourcing is driven by therapeutic context rather than firm-level strategy, with oncology the only therapeutic area where firms systematically discuss diagnostic decisions in their filings. Across all five propositions, the industry exhibits a stable inverse relationship between organic growth emphasis and acquisition activity that holds across three industry stages (Managed Growth in 2020 to 2021, Capability Expansion in 2022 to 2023, and Integration and Stabilization in 2024 to 2025). Two interpretive frames organize the findings. The Organic Narrative Contradiction describes the gap between the industry's disclosure language, which is dominated by governance theories, and its actual behavior, which is more strongly associated with capability-seeking theories. Theory as strategic scaffolding describes how shifts in firms' theoretical language serve as early indicators of approaching strategic change. The dissertation contributes an integrated eight-theory framework for boundary decisions in knowledge-intensive industries, a three-layer measurement approach that separates what firms say from what they do, and empirical evidence that capability constraints shape sourcing behavior independently of theoretical language. The implications for growth-stage firms are fourfold: make capability analysis explicit in internal planning, not only in regulatory disclosure; track peer theoretical language as a leading indicator of industry shifts; assess capability across all three sourcing modes (R&D, acquisition, partnership) rather than assuming strength in one mode substitutes for weakness in another; and treat diagnostic capability development as a portfolio question rather than a single make-or-buy choice.

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