Pharmaceutical Industry: Innovation

According to Zucker, in biotech and pharmaceutical industry proximity to potential knowledge-assets and opportunities for commercialization constitutes s a great stimulus to entrepreneurship, especially around “star” scientists or entrepreneurs. In the interdisciplinary study Brewer provides evidence that mentioned inter-organizational alliances differ from traditional hierarchical relationships, because exchanges are external to the companies, and simultaneously those exchanges constitute not only market relationships.


Practically, legal contracting constitutes only a part of such processes: reciprocity, shared norms of trustworthy behavior, honesty in research appear and respect for individual property rights to be relevant components of these alliances, enhancing their flexibility, enabling companies to gain access to unique resources and reduce costs. According to Teece, such alliances of innovation in pharmaceutical and biotech industry represent both explicit and implicit contractual activity. Furthermore, such networks are seen as a more powerful incentive for specialized companies to share their knowledge than integration through acquisition by established firms. In the latter case, it is likely that skilled employees, the key assets of the company, won’t accept the new vertical organisation, and they may leave away; if the organisation has not already designed specific internal knowledge, such acquisition strategies may result in competence destruction.


It is necessary to stress that the observations were largely based on the practical activities of SmithKline corporation as well as Eli Lilly in 80s. SmithKline-a firm some analysts had considered one of the weaker research organizations in the industry-used part of the profits from its blockbuster ulcer treatment, Tagamet, to push into new areas of immunology and into the field of recombinant DNA vaccines. SmithKline was able to bring out a recombinant hepatitis B vaccine in 1986 and was meanwhile working with Damon and Amgen on other biotech therapies. Johnson & Johnson used research contracts (with Immunomedics) and joint projects (with Amgen) as its bridge into genetic research, and by 1988, Pfizer was collaborating with four different biotech enterprises through licensing agreements, research contracts, and joint projects. After consolidating and expanding its in-house programs, the Upjohn Company also began to develop external links to biotechnology in the 1980s.

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