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Innovation and Strategic Divergence: An Empirical Study of the U.S. Pharmaceutical Industry from 1920 to 1960

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Listed author(s):
  • Jeho Lee

    ()

    (Graduate School of Management, Korea Advanced Institute of Science and Technology, 207-43Cheongryangri-dong, Dongdaemun-gu, Seoul 130-012, Korea)

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    Abstract

    Today, firms employing two distinct survival strategies---(1) innovation and (2) imitation ---coexist in the U.S. pharmaceutical industry. History indicates that this intraindustry heterogeneity did not exist prior to 1940. This study empirically investigates the origin of this strategic divergence by focusing on changes in firms' R&D inputs and outputs. It finds that some U.S. pharmaceutical firms responded to the opportunity presented by the discovery of antibiotics in the 1940s by investing more in R&D, while many others did not. Over time, the innovators dominated in developing new drugs, and the gap between innovators and imitators steadily increased. These findings also shed light on Üthe genesis of strategic groups,Ý a phenomenon that is not yet well understood.

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    File URL: http://dx.doi.org/10.1287/mnsc.49.2.143.12745
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    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 49 (2003)
    Issue (Month): 2 (February)
    Pages: 143-159

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    Handle: RePEc:inm:ormnsc:v:49:y:2003:i:2:p:143-159
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    Keywords: innovation; strategic groups; schumpeterian competition;

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    1. Rebecca Henderson & Iain Cockburn, 1996. "Scale, Scope, and Spillovers: The Determinants of Research Productivity in Drug Discovery," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 32-59, Spring.
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    5. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, July.
    6. Caves, Richard E, 1984. "Economic Analysis and the Quest for Competitive Advantage," American Economic Review, American Economic Association, vol. 74(2), pages 127-132, May.
    7. Gambardella, Alfonso, 1992. "Competitive advantages from in-house scientific research: The US pharmaceutical industry in the 1980s," Research Policy, Elsevier, vol. 21(5), pages 391-407, October.
    8. Karel O. Cool & Dan Schendel, 1987. "Strategic Group Formation and Performance: The Case of the U.S. Pharmaceutical Industry, 1963--1982," Management Science, INFORMS, vol. 33(9), pages 1102-1124, September.
    9. Amel, Dean F & Rhoades, Stephen A, 1988. "Strategic Groups in Banking," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 685-689, November.
    10. Schmalensee, Richard, 1985. "Do Markets Differ Much?," American Economic Review, American Economic Association, vol. 75(3), pages 341-351, June.
    11. Richard R. Nelson & Sidney G. Winter, 1978. "Forces Generating and Limiting Concentration under Schumpeterian Competition," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 524-548, Autumn.
    12. Porter, Michael E, 1979. "The Structure within Industries and Companies' Performance," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 214-227, May.
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    Cited by:

    1. Jackie Krafft & Francesco Quatraro & Pier Saviotti, 2014. "Knowledge characteristics and the dynamics of technological alliances in pharmaceuticals: empirical evidence from Europe, US and Japan," Journal of Evolutionary Economics, Springer, vol. 24(3), pages 587-622, July.
    2. A. Arrighetti & R. Brancati & A. Lasagni & A. Maresca, 2015. "Firms’ heterogeneity and performance in manufacturing during the great recession," Economics Department Working Papers 2015-EP03, Department of Economics, Parma University (Italy).
    3. Scott A. Shane & Karl T. Ulrich, 2004. "50th Anniversary Article: Technological Innovation, Product Development, and Entrepreneurship in Management Science," Management Science, INFORMS, vol. 50(2), pages 133-144, February.
    4. Jeffrey L. Furman & Megan MacGarvie, 2007. "Academic Science and the Birth of Industrial Research Laboratories in the U.S. Pharmaceutical Industry," NBER Chapters,in: Academic Science and Entrepreneurship: Dual Engines of Growth National Bureau of Economic Research, Inc.
    5. Leiponen, Aija & Drejer, Ina, 2007. "What exactly are technological regimes?: Intra-industry heterogeneity in the organization of innovation activities," Research Policy, Elsevier, vol. 36(8), pages 1221-1238, October.
    6. Smirnova, Michelle Hannah, 2012. "A will to youth: The woman’s anti-aging elixir," Social Science & Medicine, Elsevier, vol. 75(7), pages 1236-1243.
    7. Lee, Jeho & Park, Seung Ho & Ryu, Young & Baik, Yoon-Suk, 2010. "A hidden cost of strategic alliances under Schumpeterian dynamics," Research Policy, Elsevier, vol. 39(2), pages 229-238, March.

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