Organizing Pharmaceutical Innovation: From Science‐based Knowledge Creators to Drug‐oriented Knowledge Brokers

Abstract

The pharmaceutical industry is exposed to severe conditions: while a typical R&D process lasts up to 13 years, only one out of 10,000 substances becomes a marketable product. In addition, markets for pharmaceutical products tend to become more fragmented, leading to an increased risk of market failure. At the same time, R&D productivity has been deteriorating for several years. The number of new drug approvals is constantly declining, while R&D expenditures are escalating as a result of high investments in new drug discovery technologies and more complex clinical studies. As a response, pharmaceutical firms have started to focus on balancing the right size and structure of their R&D activities. This leads to several organizational trends: (1) novel management of technologies; (2) R&D internationalization; and (3) open innovation modes.

When technological discontinuities and disruptive business models challenge dominant industry logics: Insights from the drugs industry

“…Their structures generally involved large companies positioning their smaller innovative collaborators at the start of the value chain (Rothaermel, 2001b), and such network orchestration is seen as one of the drug industry's three main activities today -"Firms need to be able to collaborate upstream and downstream, with small or large companies" (expert 17); "Networks are orchestrated by large firms that know how to manage the whole drug development" (expert 12) -and as necessary to bring together all the dispersed resources required for the whole drug discovery and development process (Powell et al, 1996;Staropoli, 1998). But even though the discovery process has been transformed by biotechnology tools and by bioinformatics, it is still typically orchestrated by the fully integrated large firms (Bosse and Alvarez, 2010;Dhanaraj and Parkhe, 2006;Sabatier et al, 2010b), whose business models have evolved so as to fully integrate their internal and external competencies, with network orchestration as a particular capability (Gassmann and Reepmeyer, 2005).…”

“…Consequently, we selected polar types (Pettigrew, 1990) that differed from the fully integrated business model, which has already been much studied, and which is associated with the dominant logic as described both by our experts and by drug industry literature (Fisken and Rutherford, 2002;Gassmann and Reepmeyer, 2005;Lane and Probert, 2007;Laroia and Krishnan, 2005;Rothman and Kraft, 2006). Searching for business model innovation, we selected seven companies that are bringing new technologies to the drug industry, and thus potentially leading to new markets (for general company characteristics, see Appendix 2).…”

Entrepreneurial Cognition

“…Project failure is an especially common event, in particular for individuals in innovation (Burgelman and Valikangas 2005;Sminia 2003) and research-based firms and organizations (DiMasi et al 2003). Moreover, project failures are common for people in organizations facing contexts that are quickly changing (Deeds et al 2000;McGrath et al 2006) and complex (Gassmann and Reepmeyer 2005;Iacovou and Dexter 2005). Here, project failure is the termination of an endeavor that was aimed to generate value for the organization but did not meet its intended goals ).…”

The probabilistic innovation theoretical framework

“…Secondly, given wide acknowledgement of the decreasing returns to investment of pharmaceutical R&D (Gassmann & Reepmeyer 2005;Grasela & Slusser 2014;Horrobin 2000;Martin & Scott 2000;Munos 2009;Nathan 2007;Scannell et al 2012), and its failure to address problems such as Ebola outbreaks, rapidly increasing antibiotic resistance or microbial drug resistance in general within a global context of dramatically rising healthcare costs (which are particularly problematic in certain regions with ageing populations or severe resource constraints), knowledge management theory is needed to address these knowledge problems in a way that is useful to R&D practitioners and theorists. In light of these challenges, this article argues that a new paradigm in R&D is necessary to solve the knowledge problems of a new era.…”