Business Model Design for Latecomers in Biopharmaceutical Industry: The Case of Korean Firms

Abstract

Given high business risks and interdependency with various organizations in biopharmaceutical industry, business model has become a key element for firms that aim to be more sustainable and profitable. Despite its growing importance, research on the business model design in biopharmaceutical industry is limited. In particular, there is a lack of research dealing with business models or strategies for latecomers. In the face of drastic changes such as market expansion and patent expiration, there has been growing interest in latecomer’s business model in the biopharmaceutical industry. This study identifies different types of business model designs using hierarchical clustering. Based on an empirical study of 313 biopharmaceutical firms in Korea, we find three types of business models: business diversified research firm, non-diversified research firm, and mature firm. We then compare the general characteristics and performances of each cluster. The findings indicate that business diversification of biopharmaceutical firms is beneficial in terms of profit. This implies that the biopharmaceutical firms in latecomer countries such as Korea are recommended to consider business diversification for sustainable management.

What Is Important for the Growth of Latecomers in the Medical Device Industry?

“…If detailed information on diversification is available for each firm, the impact of the diversification strategy will be able to be identified in more detail. Lastly, a firms' strategy can change dynamically according to their growth stage [78]. In a future study, a framework should be presented on how the strategies covered in this study will be implemented in detail as the latecomer grows.…”

Productivity of the Korean Biopharmaceutical Industry: Exploring the Effect of Business Model and Open Innovation

“…Strategic alliances between value chain functional groups are prioritised in collaborative business models (Shin, 2015; Song & Shin, 2019). The subset of the Fully Integrated Biopharmaceutical Companies (FIBCO) business model that includes Contract Research Organisations (CROs), Contract Manufacturing Organisations (CMOs) and Contract Sales Organisations (CSOs) as collaborative businesses shows this trend, which is linked to OI (Shin, 2015; Song & Shin, 2019). Based on value chain focus, biopharmaceutical business models vary (Yun et al, 2021).…”

“…Hybrid models involving both sectors are also studied (Shin, 2015). Due to lower risk and higher expected returns, hybrid business models attract more investments than single-sector enterprises (Shin, 2015; Song & Shin, 2019).…”

“…The NRDO approach licenses and develops third-party preclinical and clinical products. Fully Integrated Pharmaceutical Companies (FIPCO or FIBCO) internally build and integrate most drug discovery and development stages, but few companies use this model due to capital requirements (Shin, 2015; Song & Shin, 2019).…”