IDEAS home Printed from https://ideas.repec.org/a/inm/ormsom/v24y2022i3p1760-1778.html

Manufacturing Process Innovation in the Pharmaceutical Industry

Author

Listed:
  • Ivan Lugovoi

    (Information Systems and Operations Management, HEC Paris, Jouy-en-Josas 78530, France)

  • Dimitrios A. Andritsos

    (Information Systems and Operations Management, HEC Paris, Jouy-en-Josas 78530, France)

  • Claire Senot

    (A. B. Freeman School of Business, Tulane University, New Orleans, Louisiana 70118)

Abstract

Problem definition : Process innovation is commonly claimed to be a major source of competitive advantage for firms. Despite this perceived influence, it has received substantially less attention than product innovation, and much uncertainty remains about its true association with firm performance. We investigate the relationship between a pharmaceutical firm’s portfolio of manufacturing process innovations and its economic performance. Academic/practical relevance : We uniquely conduct a multidimensional evaluation of a firm’s portfolio of manufacturing process innovations at the product level. This allows a quantitative evaluation of both the relative benefit of the different dimensions of a portfolio as well as the potential complementarities between these in different technological landscapes. Methodology : Through a collaboration with expert patent attorneys, we develop a unique longitudinal data set that combines secondary data and evaluations of a firm’s portfolio of process patents along two key dimensions: novelty and scope. We conduct econometric analyses for a large-scale sample of active pharmaceutical ingredients (APIs) whose product patents have expired and for which process innovation is thus the main source of competitive advantage. Results : We find a positive association between the presence of manufacturing process innovation and firm performance. However, although portfolio’s scope appears to always be beneficial to performance, the effect of novelty alone depends on the ruggedness of the technological landscape: negative in smoother landscapes and positive in more rugged landscapes. Results further suggest that novelty and scope of a portfolio of process innovations are complementary across technological landscapes. Managerial implications : Our results provide important practical insights that can inform the organization and execution of the research and development process across high-technology industries. In particular, although process innovations can be economically beneficial, investing in high-novelty process innovations without a corresponding high scope could jeopardize payoffs, especially in technological landscapes that are relatively smooth.

Suggested Citation

  • Ivan Lugovoi & Dimitrios A. Andritsos & Claire Senot, 2022. "Manufacturing Process Innovation in the Pharmaceutical Industry," Manufacturing & Service Operations Management, INFORMS, vol. 24(3), pages 1760-1778, May.
    • Handle: RePEc:inm:ormsom:v:24:y:2022:i:3:p:1760-1778
    DOI: 10.1287/msom.2021.1035
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/msom.2021.1035
    Download Restriction: no
    File URL: https://libkey.io/10.1287/msom.2021.1035?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Peter S. Fader & Bruce G. S. Hardie & Jen Shang, 2010. "Customer-Base Analysis in a Discrete-Time Noncontractual Setting," Marketing Science, INFORMS, vol. 29(6), pages 1086-1108, 11-12.
    2. David H. Howard & Peter B. Bach & Ernst R. Berndt & Rena M. Conti, 2015. "Pricing in the Market for Anticancer Drugs," Journal of Economic Perspectives, American Economic Association, vol. 29(1), pages 139-162, Winter.
    3. Mary M. Crossan & Marina Apaydin, 2010. "A Multi‐Dimensional Framework of Organizational Innovation: A Systematic Review of the Literature," Journal of Management Studies, Wiley Blackwell, vol. 47(6), pages 1154-1191, September.
    4. Grimaldi, Michele & Cricelli, Livio & Di Giovanni, Martina & Rogo, Francesco, 2015. "The patent portfolio value analysis: A new framework to leverage patent information for strategic technology planning," Technological Forecasting and Social Change, Elsevier, vol. 94(C), pages 286-302.
    5. Ernst, Holger, 2001. "Patent applications and subsequent changes of performance: evidence from time-series cross-section analyses on the firm level," Research Policy, Elsevier, vol. 30(1), pages 143-157, January.
    6. Jochen Schlapp & Nektarios Oraiopoulos & Vincent Mak, 2015. "Resource Allocation Decisions Under Imperfect Evaluation and Organizational Dynamics," Management Science, INFORMS, vol. 61(9), pages 2139-2159, September.
    7. Kanavos, Panos, 2014. "Measuring performance in off-patent drug markets: A methodological framework and empirical evidence from twelve EU Member States," Health Policy, Elsevier, vol. 118(2), pages 229-241.
    8. Kenneth K. Boyer, 1999. "Evolutionary Patterns of Flexible Automation and Performance: A Longitudinal Study," Management Science, INFORMS, vol. 45(6), pages 824-842, June.
    9. Lee Fleming & Olav Sorenson, 2004. "Science as a map in technological search," Strategic Management Journal, Wiley Blackwell, vol. 25(8‐9), pages 909-928, August.
    10. repec:fth:harver:1473 is not listed on IDEAS
    11. Zi-Lin He & Poh-Kam Wong, 2004. "Exploration vs. Exploitation: An Empirical Test of the Ambidexterity Hypothesis," Organization Science, INFORMS, vol. 15(4), pages 481-494, August.
    12. Daniel A. Levinthal, 1997. "Adaptation on Rugged Landscapes," Management Science, INFORMS, vol. 43(7), pages 934-950, July.
    13. Leonard-Barton, Dorothy, 1988. "Implementation as mutual adaptation of technology and organization," Research Policy, Elsevier, vol. 17(5), pages 251-267, October.
    14. C. Lanier Benkard, 2000. "Learning and Forgetting: The Dynamics of Aircraft Production," American Economic Review, American Economic Association, vol. 90(4), pages 1034-1054, September.
    15. Verhoeven, Dennis & Bakker, Jurriën & Veugelers, Reinhilde, 2016. "Measuring technological novelty with patent-based indicators," Research Policy, Elsevier, vol. 45(3), pages 707-723.
    16. Utterback, James M & Abernathy, William J, 1975. "A dynamic model of process and product innovation," Omega, Elsevier, vol. 3(6), pages 639-656, December.
    17. Manfredi Bruccoleri & Giovanni Perrone & Erica Mazzola & Robert Handfield, 2019. "The magnitude of a product recall: offshore outsourcing vs. captive offshoring effects," International Journal of Production Research, Taylor & Francis Journals, vol. 57(13), pages 4211-4227, July.
    18. Edwin Mansfield, 1986. "Patents and Innovation: An Empirical Study," Management Science, INFORMS, vol. 32(2), pages 173-181, February.
    19. Russell J. Funk & Jason Owen-Smith, 2017. "A Dynamic Network Measure of Technological Change," Management Science, INFORMS, vol. 63(3), pages 791-817, March.
    20. Jürgen Mihm & Fabian J. Sting & Tan Wang, 2015. "On the Effectiveness of Patenting Strategies in Innovation Races," Management Science, INFORMS, vol. 61(11), pages 2662-2684, November.
    21. Aharonson, Barak S. & Schilling, Melissa A., 2016. "Mapping the technological landscape: Measuring technology distance, technological footprints, and technology evolution," Research Policy, Elsevier, vol. 45(1), pages 81-96.
    22. Richard Gilbert & Carl Shapiro, 1990. "Optimal Patent Length and Breadth," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 106-112, Spring.
    23. Linda Argote & Sara L. Beckman & Dennis Epple, 1990. "The Persistence and Transfer of Learning in Industrial Settings," Management Science, INFORMS, vol. 36(2), pages 140-154, February.
    24. Linda Argote & Manpreet Hora, 2017. "Organizational Learning and Management of Technology," Production and Operations Management, Production and Operations Management Society, vol. 26(4), pages 579-590, April.
    25. Hsiao-Hui Lee & Jianer Zhou & Jingqi Wang, 2018. "Trade Credit Financing Under Competition and Its Impact on Firm Performance in Supply Chains," Manufacturing & Service Operations Management, INFORMS, vol. 20(1), pages 36-52, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yu, Man & Liu, Kanying, 2025. "Investment strategy of low-carbon technology in a competitive market: Technology R&D or purchases?," Economic Modelling, Elsevier, vol. 151(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ivan Lugovoi & Dimitrios A. Andritsos & Claire Senot, 2022. "Novelty and scope of process innovation: The role of related and unrelated manufacturing experience," Production and Operations Management, Production and Operations Management Society, vol. 31(10), pages 3877-3895, October.
    2. Qu, Guannan & Chen, Jin & Zhang, Ruhao & Wang, Luyao & Yang, Yayu, 2023. "Technological search strategy and breakthrough innovation: An integrated approach based on main-path analysis," Technological Forecasting and Social Change, Elsevier, vol. 196(C).
    3. Hazhir Rahmandad & Nelson Repenning, 2016. "Capability erosion dynamics," Strategic Management Journal, Wiley Blackwell, vol. 37(4), pages 649-672, April.
    4. Mohd Shadab Danish & Pritam Ranjan & Ruchi Sharma, 2022. "Assessing the Impact of Patent Attributes on the Value of Discrete and Complex Innovations," Papers 2208.07222, arXiv.org.
    5. Linda Argote & Sunkee Lee & Jisoo Park, 2021. "Organizational Learning Processes and Outcomes: Major Findings and Future Research Directions," Management Science, INFORMS, vol. 67(9), pages 5399-5429, September.
    6. Gatti, Corrado & Volpe, Loredana & Vagnani, Gianluca, 2015. "Interdependence among productive activities: Implications for exploration and exploitation," Journal of Business Research, Elsevier, vol. 68(3), pages 711-722.
    7. Nilanjana Dutt & Megan Lawrence, 2022. "Learning to Manage Breadth: Experience as Repetition and Adaptation," Organization Science, INFORMS, vol. 33(4), pages 1300-1318, July.
    8. William P. Barnett & Daniel A. Levinthal, 2017. "Special Issue Introduction: Evolutionary Logics of Strategy and Organization," Strategy Science, INFORMS, vol. 2(1), pages 1-1, March.
    9. Christian Mealey & Balaji R. Koka & Robert E. Hoskisson, 2025. "Long Jump Learning: Absorbing Distant Knowledge via Familiar Components," Organization Science, INFORMS, vol. 36(4), pages 1598-1624, July.
    10. Cammarano, Antonello & Michelino, Francesca & Lamberti, Emilia & Caputo, Mauro, 2017. "Accumulated stock of knowledge and current search practices: The impact on patent quality," Technological Forecasting and Social Change, Elsevier, vol. 120(C), pages 204-222.
    11. Scott F. Rockart & Kristin Wilson, 2019. "Learning in Cycles," Organization Science, INFORMS, vol. 30(1), pages 70-87, February.
    12. Scott F. Rockart & Nilanjana Dutt, 2015. "The rate and potential of capability development trajectories," Strategic Management Journal, Wiley Blackwell, vol. 36(1), pages 53-75, January.
    13. Keye Wu & Ziyue Xie & Jia Tina Du, 2024. "Does science disrupt technology? Examining science intensity, novelty, and recency through patent-paper citations in the pharmaceutical field," Scientometrics, Springer;Akadémiai Kiadó, vol. 129(9), pages 5469-5491, September.
    14. Wang, Fang, 2024. "Does the recombination of distant scientific knowledge generate valuable inventions? An analysis of pharmaceutical patents," Technovation, Elsevier, vol. 130(C).
    15. Jason M. Rathje & Riitta Katila, 2021. "Enabling Technologies and the Role of Private Firms: A Machine Learning Matching Analysis," Strategy Science, INFORMS, vol. 6(1), pages 5-21, March.
    16. Huang, Kenneth Guang-Lih & Huang, Can & Shen, Huijun & Mao, Hao, 2021. "Assessing the value of China's patented inventions," Technological Forecasting and Social Change, Elsevier, vol. 170(C).
    17. Hou, Tianyu & Zhang, Liang & Li, Julie Juan & Chong, Bin & Wu, Yanzi, 2024. "The quest for valuable inventions: Knowledge search and the value of patented inventions," Technological Forecasting and Social Change, Elsevier, vol. 209(C).
    18. Cao, Likun & Evans, James, 2026. "Deep versus broad technology search and the timing of innovation impact," Technological Forecasting and Social Change, Elsevier, vol. 225(C).
    19. Jeongsik “Jay” Lee & Hyun Ju Jung & Hyunwoo Park, 2023. "Rare is beautiful? Rareness, technology value, and the moderating role of search domain and knowledge maturity," Production and Operations Management, Production and Operations Management Society, vol. 32(4), pages 1019-1040, April.
    20. Sun, Bixuan & Kolesnikov, Sergey & Goldstein, Anna & Chan, Gabriel, 2021. "A dynamic approach for identifying technological breakthroughs with an application in solar photovoltaics," Technological Forecasting and Social Change, Elsevier, vol. 165(C).

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormsom:v:24:y:2022:i:3:p:1760-1778. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.