Are industry associations conducive to radical innovation in biopharmaceutical companies?—The dual effect of absorptive capacity and digital investment.

Biopharmaceutical companies today view R&D innovation as crucial for gaining a competitive edge. Consequently, achieving radical innovation in biotechnology has become a major concern. While researchers have identified various drivers of radical innovation within firms, they often overlook the significant role that heterogeneous resources in network alliances play. This study addresses this gap by examining industry association embeddedness through the lens of social networking. Focusing on China's listed pharmaceutical manufacturing companies from Shanghai and Shenzhen A-share markets between 2007 and 2021, we find a positive relationship between industry-association embeddedness and radical innovation. Our findings indicate that this positive effect is significantly enhanced by firms' absorptive capacity. Moreover, increased digital investment further strengthens the effect of absorptive capacity on the relationship between industry-association embeddedness and radical innovation. This study offers theoretical insights into the role of intermediary bodies, such as industry associations, in fostering radical innovation. It also provides valuable lessons for biopharmaceutical companies in transitioning economies seeking to explore innovative pathways. • It provides the critical role of heterogeneous resources embedded in network alliances. • It attempts to fill the aforementioned research gap by introducing industry association embeddedness. • It provides the theoretical support for objectively evaluating the effects of intermediary bodies. • It offers lessons for the exploration of innovation pathways for biopharmaceutical enterprises. [ABSTRACT FROM AUTHOR]