Journal of Management and Governance 1: 147–175, 1998. 147 c 1998 Kluwer Academic Publishers. Printed in the Netherlands. The Evolution of Knowledge and the Dynamics of an Industry Network LUIGI ORSENIGO 1 , FABIO PAMMOLLI 2 , MASSIMO RICCABONI 3 , ANDREA BONACCORSI 4 and GIUSEPPE TURCHETTI 3 1 Department of Economics, Bocconi University, Milan, Italy; 2 Faculty of Economics “Richard Goodwin”, University of Siena, Italy; 3 Scuola Superione S. Anna, Pisa, Italy; 4 Faculty of Economics, University of Pisa, Italy Abstract. The paper moves a step forward in the direction of establishing a connection between the structure and evolution of knowledge bases and the structure and evolution of organizational forms in innovative activities in a science-intensive industry. The paper has an explicit focus on the dynamics of the network of collaborative agreements in R&D in the pharma/biotech industry after the “molecular biology revolution”. Using a comprehensive dataset, built by the authors integrating several sources in the industry, the dynamics of the network over time is extensively analyzed. With regards to network structure, it is found that, while the size of the network increases over time due to net flows of entry, its topological properties remain relatively unchanged. The evolution of the network has occurred without relevant deformations in the core-periphery profile. With regards to age-dependent propensity to collaborate, the paper finds that the extent of inter-generational collaboration is much more significant than intra-generational collaboration. In addition, the propensity of firms of a given generation to enter into collaboration with firms of a different generation increases with the distance between the two, while the total number of intra-generational collaborations decreases over time and, moreover, tends to decrease for most recent generations. In the paper a unitary and coherent explanation of the evidence is developed, coming to reveal the existence of a striking isomorphism between structural properties of the dynamics of knowledge and of the evolution of network structure. Key words: Network dynamics, science-based industries, pharmaceutical industry, biotechnology industry, R&D collaborative agreements. 1. Introduction Networks of collaborative relationships among firms have attracted a great deal of attention in recent times among sociologists, organizational theorists and industrial economists. In particular, it is now widely recognized that collaborative relationships are an important form of organization of innovative activities. However, one can find in the literature widely different interpretations of the nature, motivations, structure and functions of these networks, ranging from more sociologically oriented approaches to economic explanations based on (various mixes of) alternative theoretical backgrounds, e.g. transaction costs, contract theories, game theory and competence-based accounts of firms’ organization. In turn, these interpretations generate widely different predictions about the evolution of collaborative relationships over time.