Measuring the Efficiency of U.S. Pharmaceutical Companies Based on Open Innovation Types

Abstract

The pharmaceutical industry, where research and development (R&D) efficiency is central to company survival, has recently faced significant challenges. To increase efficiency, companies must implement strategies such as open innovation (OI), wherein they sell their intellectual property, maximize their use of external resources, adjust their structures, and implement new business models. In this study, we divided 701 U.S. pharmaceutical companies according to their OI strategies to measure and compare their R&D efficiencies between 2001 and 2016. We analyzed the deal data of companies by first dividing them into four groups (inside-out, outside-in, coupled, and closed) to calculate R&D efficiency using stochastic and meta-frontier analyses. In the first group analysis, the coupled group shows high technical efficiency, but in an overall comparison, the inside-out group achieves the highest efficiency values. These values increased between 2005 and 2010, when the R&D crisis in the industry was great at its highest. We thus identified the characteristics of each group based on our results, and presented extensive analyses using a time-series comparison and enterprise-level analysis. We claim that pharmaceutical companies can still cope with the current R&D crisis by implementing different OI strategies.

The Influence of a Firm’s Capability and Dyadic Relationship of the Knowledge Base on Ambidextrous Innovation in Biopharmaceutical M&As

“…Additionally, as the expiration of a patent for a blockbuster product can cause negative changes in the financial structure of a biopharmaceutical firm, such a firm is faced with market pressure which forces it to continue to develop new drugs to grow profits [34,35]. To solve this problem, corporations tend to choose M&As as a quick solution [32].…”

“…For instance, the drivers of M&As, according to the attributes of the biopharmaceutical industry, can solve problems faced by firms, but these solutions may be no more than a quick fix that is heavily dependent on decision-making instead of being a long-term future strategy [30]. Others argue that M&A has slightly or no positive influence on R&D productivity [34], or has no positive effect on a firm's profits [37]. Besides, some researchers believe that the expansion from an M&A negatively influences R&D creativity in the initial stage of the integration and has a negative effect on synergy and innovation after the M&A [38].…”

Can User Innovation Grow a Firm? The Case of the Korean Smart Media Industry

“…In the rapidly changing and innovating high-tech industry, a huge cost is required to attain and hold technological competency. Because of the high uncertainty, it is challenging for a firm to control its entire process [19][20][21]. Thus, from the viewpoint of outside-in innovation, strategic alliance is one of a firm's options.…”

Factors Affecting the Outbound Open Innovation Strategies in Pharmaceutical Industry: Focus on Out-Licensing Deal

“…It entails astronomical research and development (R&D) costs, and a long-time perspective attributed to the regulatory approval required for the production of new drugs. It is characterized by a technology-push model which depends on a complicated path of R&D breakthroughs with unsettled timing and hard-to-anticipate outcomes [1][2][3]. The extremely technology-driven, risky, costly and long drug development process used to be dominated by large pharmaceutical firms, sometimes referred to as the 'Blockbuster Model'.…”

“…The large pharmaceutical firms have been faced with the (1) patent expiration of their main blockbuster drugs, and the overall pharmaceutical industry being in the situation of (2) lowering R&D productivity due to a reduction in the number of approved new molecular entities. This indicates that the strategy of sourcing the whole required knowledge and skills to develop a new drug within the firm is becoming hard to execute [2,4,5].…”