Abstract
The relationship between the location of 102 biotechnology companies that went public between 1983 and 1992 and their level of research productivity and market value was studied. The research productivity of the firm was measured by the number of products in each firms' production pipeline while each firms' market value was measured as the product of the number of outstanding shares and the closing stock price. Firms' location characteristics included the percentage of all biotechnology firms located in an individual firm's statistical metropolitan area (SMA), the total dollar amount and number of National Institute of Health grants to universities within each firm's SMA, national rankings of medical schools and graduate science programs within each firm's SMA and the number of students graduating with Ph.D.s in scientific fields within each firm's SMA. The effect of firm location productivity and market value is indirect. Firm location variables are hypothesized to enhance the absorptive capacity of each firm which directly affects firm productivity and market value. A firm's absorptive capacity is an intangible resource which gives a firm an ability to recognize the value of information, assimilate it, and apply it commercially