The rise of spin-offs: Fueling pharmaceutical innovation through collaboration

Abstract

Collaboration among various organizations is important for the sustainable creation of new innovative drugs. Previously, drug discovery was dominated by large pharmaceutical companies; however, various new players are now actively involved in this endeavor. Nevertheless, the factors affecting the financing needed to sustain and expand the research and development (R&D) of spin-off firms has received little research attention in the U.S. and Europe, which have produced many successful spin-offs in recent years. Therefore, considering the recent changes in inter-organizational deal networks in the pharmaceutical industry, this study conducted network and statistical analyses of the factors affecting the amount of financing raised by a total of 53 spin-off firms from the U.S. and the U.K., to sustain their businesses. The results show that the amount of funding raised by spin-off firms is positively affected by their betweenness centrality and the number of international inter-organizational deals. This study’s findings have strategic implications for increasing collaboration between pharmaceutical and spin-off firms by identifying the factors necessary for spin-off firms to sustainably expand their R&D activities.