Pharmaceutical Firms and the Transition to Biotechnology: A Study in Strategic Innovation

Abstract

During the twentieth century, the pharmaceutical industry experienced a series of dramatic changes as developments in science and technology generated new opportunities for innovation. Each of these transitions forced existing firms to develop new capabilities. The authors examine the most recent such transition, the shift to molecular genetics and recombinant DNA technology (1970 to the present), and explain how and why this transformation differed from the previous ones in pharmaceuticals. Small biotech startups played an important role in this transition, and the large pharmaceutical firms that began to enter the field had to develop new strategies for innovation. Two major strategies were adopted by the early movers, all of which created various kinds of alliances with the small biotech businesses. By the mid-1990s, the leading pharmaceutical manufacturers had established significant capabilities in the new field, but they were continuing to work with specialized biotechs in order to innovate across a broad range of therapeutic categories.

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

“…However, the drug industry, which has been facing several waves of technological discontinuities, does not seem to be following that path when technological discontinuities occur (Allarakhia and Walsh, 2011;Galambos and Sturchio, 1998;Hopkins, Martin et al, 2007;Rothaermel, 2000), which questions the notion of drivers of evolution in technology based industries. But when technological discontinuity does not lead to disruptions of its dominant logic, what other forces lead to such change?…”

“…Since its origins in the late 19th century, the industry has experienced successive waves of scientific progress, starting from the development and gradual acceptance of the germ theory of disease at the turn of the century, then accelerating during the chemo-therapeutic revolution of the 1930s and 1940s where pharmaceutical companies rapidly industrialized drug discovery and development and managed the entire drug value chain. In the 1940s and 1950s, progress in virology and then in microbial biochemistry and enzymology provided the basis for a new style of targeted pharmaceutical research and development (Galambos and Sturchio, 1998). The industry has focused on mass market products, and its leading and most profitable companies (Pfizer, Roche Holdings, Sanofi-Aventis, Novartis, Amgen etc.)…”

14 Organizational and Institutional Genesis

“…Such arguments highlight the discontinuity between the older tools of drug discovery, based in organic chemistry, and the novel methods of molecular biology and genetics (Gambardella, 1995;Galambos and Sturchio, 1998;Henderson, Orsenigo, and Pisano, 1999). This Schumpeterian portrait of a process of creative destruction captures in broad brushstrokes the changed technological landscape, but this account does not illuminate where the winds of change would be the strongest.…”

Biopharmaceutical entrepreneurship in two Japanese and French bioclusters: Differences in founder profiles and experience

“…As large pharmaceutical firms' R&D-based exploitation strategies seem to meet productivity limits, biotech startups propose new therapeutic approaches, more targeted drug design processes, and a new model for funding radical innovation (Galambos et al 1998). …”