Arora, Ashish and Gambardella, Alfonso and Pammolli, Fabio and Riccaboni, Massimo (2000): The Nature and the Extent of the Market for Technology in Biopharmaceuticals. Published in: R&D, Innovation and Competitiveness in the European Chemical Industry, Springer (2004): pp. 175-202.
Download (179kB) | Preview
This paper explored an unusually comprehensive dataset of more than 2,000 drug R&D projects all over the world during the 1990s. This enabled us to characterise several features of the innovation process in pharmaceuticals, particularly the different role and comparative R&D performance of the large established drug companies vis-à-vis smaller high-tech specialist firms - the so-called New Biotechnology Firms (NBFs). Our results can be summarised as follows: a)The NBFs are largely an American phenomenon. More than half of the drug R&D projects originated in the US are by NBFs, while almost 90% of the drug R&D projects originated in Europe are from established pharmaceutical firms; b)Collaborative R&D projects are consistently more likely to occur in the US than in Europe. However, in-house projects are a significant majority of the drug R&D projects that entered the clinical stages. c)The established pharmaceutical companies have comparative advantages with respect to the NBFs in drug development (clinical trials). In drug discovery there is no advantage related to scale. Unlike clinical developments, where the large firms seem to have superior capabilities when compared to the NBFs, in discovery there is no inherent superiority (in terms of ultimate probability of success of the compounds) of either the NBFs or the large firms. d)The NBFs are not specialized in more risky R&D projects. In fact, more risky drug projects (i.e. drugs for which there is no or there are few existing remedies) are more likely to be undertaken by the larger pharmaceutical companies. This suggests that scale, market power, and the ability to moblise large amounts of resources are key factors in enabling the firms to sustain such higher risks. e)Other things being equal, the projects originated by the NBFs are more likely to fail in the earlier clinical stages. This suggests that the NBFs perform a good deal of exploration without incurring the higher costs of failing at later stages.
|Item Type:||MPRA Paper|
|Original Title:||The Nature and the Extent of the Market for Technology in Biopharmaceuticals|
|Keywords:||Innovation, Markets for technology, Biopharmaceutical Industry, R&D Collaboration|
|Subjects:||L - Industrial Organization > L6 - Industry Studies: Manufacturing > L65 - Chemicals; Rubber; Drugs; Biotechnology
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships; Contracts and Reputation; Networks
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L19 - Other
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development; Intellectual Property Rights > O32 - Management of Technological Innovation and R&D
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure
|Date Deposited:||01. Jul 2009 09:17|
|Last Modified:||12. Feb 2013 00:42|
Arora, A., Fosfuri, A. and Gambardella, A. 2000: Markets for Technology: Why Do We See Them, Why Don’t We See More of Them, and Why Should We Care, manuscript, Carnegie Mellon University, Pittsburgh.
Arrow K.J., 1983: Innovation in Large and Small Firms, in Ronen J. (ed.) Entrepreneurship, Lexington Books, Lexington, Ma.
Gambardella, A., 1995: Science and Innovation in the US Pharmaceutical Industry, Cambridge, Cambridge University Press.
Gans, J., Hsu, D. and Stern, S. 2000: “When Does Start-Up Innovation Spur the Gale of Creative Destruction?” NBER Working Paper N.7851, Cambridge MA.
Hagedoorn, J. 1993: “Understanding the Rationale of Strategic Technology Partnering: Interorganizational Modes of Cooperation and Sectoral Differences” Strategic Management Journal, Vol.15, pp.371-385.
Hagedoorn, J. and Schakenraad, J. 1994: “The Effect of Strategic Technology Alliances on Company Performance” Strategic Management Journal, Vol.15, pp.291-309.
Holmostrom, B. 1989: “Agency Costs and Innovation” Journal of Economic Behavior and Organization, Vol.12 (3), pp.305-327.
Kline, S. and Rosenberg, N. 1986: “An Overview of Innovation” in Landau, R. and Rosenberg, N. (eds.) The Positive Sum Strategy, National Academy Press, Washington DC.
Kogut, B. 1988: “Joint-Ventures: Theoretical and Empirical Perspectives” Strategic Management Journal, Vol.9, pp.319-333.
March J. 1991: “Exploration and Exploitation in Organizational Learning”, Organization Science, Vol.1 (2), pp. 71-87.
March, J. and Levinthal, D. 1993: “The Myopia of Learning” Strategic Management Journal, Vol.14, pp.95-112.
Orsenigo L. 1989: The Emergence of Biotechnology, London, Pinter Publishers.
Pisano, G. 1997: “R&D Performance, Collaborative Arrangements, and the Market for Know-How: A Test of the “Lemons” Hypothesis in Biotechnology”, draft, Harvard Business School.
Schwartzman, D. 1976: Innovation in the Pharmaceutical Industry, John Hopkins University Press, Baltimore MD.
Teece, D. 1986: “Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing, and Public Policy” Research Policy, Vol.15, pp.285-305.