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Biopharmaceutical R&D outsourcing: Short-term gain for long-term pain?

Author

Listed:
  • Jack Scannell

    (Science, Technology and Innovation Studies Subject Group [Edinburgh] - School of Social and Political Science [ Edinburgh] - Edin. - University of Edinburgh)

  • Bruno Versaevel

    (EM - EMLyon Business School)

  • Etienne Billette de Villemeur

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

Abstract

Research and development (R&D) outsourcing offers some obvious productivity benefits (e.g., access to new technology, variabilised costs, risk sharing, etc.). However, recent work in economics points to a productivity headwind at the level of the innovation ecosystem. The market for technologies with economies of scope and knowledge spillovers (those with the biggest impact on industry economics and social welfare) has structural features that allow customers to capture a disproportionate share of economic value and transfer a disproportionate share of economic risk to technology providers, even though the providers aim to maximise profit. This reduces the incentives to invest in new ventures that specialise in the most promising early-stage projects. Therefore, near-term gains from R&D outsourcing can be offset by slower innovation in the long run.

Suggested Citation

  • Jack Scannell & Bruno Versaevel & Etienne Billette de Villemeur, 2022. "Biopharmaceutical R&D outsourcing: Short-term gain for long-term pain?," Post-Print hal-03967759, HAL.
    • Handle: RePEc:hal:journl:hal-03967759
    DOI: 10.1016/j.drudis.2022.08.001
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    More about this item

    Keywords

    Research; Development; Biotechnology; Pharmaceuticals; Externalities; Outsourcing;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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