Technological and product‐market experience and the success of new product introductions in the pharmaceutical industry

Abstract

The growth and development of a firm depend on its ability to introduce new products over time.To do this successfully, it requires technological knowledge, the ability to combine knowledge elements into valuable new products, and the complementary assets that facilitate the manufacturing, sales, and distribution of those products. We argue that these all develop as a function of a firm's experience in its technological and product-market domains. Moreover, given the prospect of complementarities among technological and product-market experience, the value of any one type of experience may be enhanced by the presence of another. Therefore, new products will be more successful when a firm possesses the appropriate stocks of technological and productmarket experience. We test this idea by analyzing whether pharmaceutical firms' experience in their technological and product-market domains confer early advantages to their new product offerings, and lead to higher initial sales levels.

Environmental context, managerial cognition, and strategic action: an integrated view

“…Top managers of firms in high velocity environments also face high levels of competitive hostility; building sustainable competitive advantage is difficult because firms cannot protect existing products and processes for a long time (Eisenhardt and Martin, 2000;Fines, 1998;Williams, 1994) and, therefore, firms cannot sustain above-average profits based on a single established innovation or advantage. As top managers of firms in high velocity environments consistently address the fast changing, hostile, and unpredictable changes in the task sectors by introducing new products and/ or process technologies faster (Nerkar and Roberts, 2004;Cottrell and Nault, 2004) and carry out frequent strategic and organizational changes (Eisenhardt and Martin, 2000;Eisenhardt, 1989;Fines, 1998), task sector cues are likely to dominate subjective representations of their operating environment. In sum the stronger salience of task sector in high velocity environments is likely to result in greater dominance of task sector concepts in subjective representations of the environment, whereas the weaker salience of the task sector in low velocity environments will lead to lower levels of attention focus on task sector in managers' subjective representations.…”

“…The strategy literature has consistently prescribed the importance of aligning firm strategies with opportunities and threats in the environment (Andrews, 1987;Ginsberg, 1988;Miles and Snow, 1972;Mintzberg, 1972;Porter, 1985;Quinn, 1980;Hofer and Schendel, 1978). Further, research has demonstrated that firms that initiate timely strategic responses to changes in the environment outperform those that delay in their response (Cotrell and Nault, 2004;Haveman, 1992;Nerkar and Roberts, 2004;Smith and Grimm, 1987;Baum and Wally, 2003). Studies have also shown that firms that fail to adjust in a timely fashion may enter a downward spiral from which they do not escape (Cameron, Sutton, and Whetten, 1988;Hambrick and D'Aveni, 1988).…”

“…We used three established and validated measures of rate of industry change: number of new products introduced, time span (number of years) between new products introduced, and depreciation rates of capital equipment (coefficient alpha = 0.92) (Fines, 1998;Katila and Ahuja, 2002;Martin and Mitchell, 1998;Mendelson and Pillai, 1999;Nerkar and Roberts, 2004). We used trade and industry-specific journals and manufacturer's catalogs to gather information on the number and number of years between new product introductions.…”

“…We used trade and industry-specific journals and manufacturer's catalogs to gather information on the number and number of years between new product introductions. Consistent with previous studies on industry velocity (Fines, 1998;Mendelson and Pillai, 1999) and new product introductions (Katila and Ahuja, 2002;Martin and Mitchell, 1998;Nerkar and Roberts, 2004), we focused on individual products introduced rather than categories of new products introduced. We computed the average depreciation rates for each industry based on the 10-K forms of incumbent firms in the industry.…”

The Antecedents and Innovation Consequences of Organizational Search: Empirical Evidence for Spain

“…In these studies, search strategies related to the discovery of new knowledge are aligned with exploration, while those that address the learning of current knowledge are associated with exploitation. Despite differences in their objectives and outcomes, it is widely recognized that both types of strategy are needed in order for firms to enhance their innovation performance (March, 1991;Katila and Ahuja, 2002;Nerkar and Roberts, 2004;Laursen and Salter, 2006).…”