Abstract
This study undertakes an analysis of external sourcing of knowledge by biotechnology companies. It suggests that biotechnology companies need to be more realistic about R&D operational models in a context where technological changes are only incremental and companies based solely on single technology platforms are highly inefficient. It is argued that in order to build, preserve or enhance their knowledge creation capabilities in a fast changing environment, firms increasingly combine internal ‘‘core’’ capabilities with externally acquired ‘‘complementary’’ ones. Knowledge creation requires in reaching the right balance between exploration and exploitation. It consists of activities within the firm in order to create knowledge from its own experience and from the experience of other firms, and on the exploitation of that knowledge to fulfill the mission of the firm. Thus, a biotechnology company’s ability to choose technologies wisely will have a large impact on the performance of its R&D organization in terms of time to market, productivity, and product quality.
Highlights
Sophisticated techniques such as genomics, combinatorial chemistry, bioinformatics, functional genomics, proteomics and automated target validation have revolutionized the biotechnology industry’s approach to drug discovery
Such changes in the drug discovery process have considerably disrupted the competitive dynamics in the drug discovery industry by dispersing innovation activity (Audretsch and Feldman, 2003; Chesbrough, 2003)
The research outlined in this study suggests that the best approach for a research intensive company to action between biotechnology companies has mainly taken forms of strategic alliances and mergers & acquisitions (M&A) transactions
Summary
Sophisticated techniques such as genomics, combinatorial chemistry, bioinformatics, functional genomics, proteomics and automated target validation have revolutionized the biotechnology industry’s approach to drug discovery. In a constantly changing environment, implementing a successful strategy depends to a significant degree on learning with new directions and on recognizing opportunities that materialize during the process In such a context, external sourcing helps multiply opportunities of discovery, provide the requisite flexibility that enables the firm to win the race against time and to increase the chances of product success. In a R&D outsourcing environment, due to discrepancies in data integrity and harmonization strategic alliances contribute mainly to the dispersion of the product information flow from one stage to another within the value chain of the drug discovery process This presents a dramatic challenge for an early stage biotechnology company since the largest value to be captured resides in innovations that affect the later stages of drug development. Studies have demonstrated that 30 to 70% of alliances are not successful (Kogut 1989; Bleeke and Ernst 1995)
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