Technology upgrading is a key element of industrialisation and catch-up in developing countries. It is understood that a successful technology upgrading is linked to a coupling of global knowledge flows with local technology effort. However, the changing nature of technology and industries are challenging existing processes involved in the technology upgrading and creating new patterns of capability development. This raises the questions about factors and processes involved in technology upgrading in firms from developing countries. In this context, this paper explores the movement of Indian pharmaceutical firms from ‘small molecule generics’ towards targeting a new set of opportunities presented by the emergent biosimilar segment in the global generics market. Some leading Indian firms have adopted this technological upgrading route by making a gradual transition towards the development of biosimilar capabilities and using four case studies, this paper reveals internationalisations in form of overseas acquisitions and collaborations with MNCs formed the key basis of technology upgrading strategy for the Indian firms. This paper further shows the hiring of biotech scientists working in advanced countries increasing R&D investment and reorganisation of R&D contributed to managerial upgrading and played a significant role in creating firms' ability to absorb external knowledge.