Technological regimes and demand structure in the evolution of the pharmaceutical industry
This paper examines how the nature of the technological regime governing innovative activities and the structure of demand interact in determining market structure, with specific reference to the pharmaceutical industry. The key question concerns the observation that—despite high degrees of R&D and marketing-intensity—concentration has been consistently low during the whole evolution of the industry. Standard explanations of this phenomenon refer to the random nature of the innovative process, the patterns of imitation, and the fragmented nature of the market into multiple, independent submarkets. We delve deeper into this issue by using an improved version of our previous “history-friendly” model of the evolution of pharmaceuticals. Thus, we explore the way in which changes in the technological regime and/or in the structure of demand may generate or not substantially higher degrees of concentration. The main results are that, while technological regimes remain fundamental determinants of the patterns of innovation, the demand structure plays a crucial role in preventing the emergence of concentration through a partially endogenous process of discovery of new submarkets. However, it is not simply market fragmentation as such that produces this result, but rather the entity of the “prize” that innovators can gain relative to the overall size of the market. Further, the model shows that emerging industry leaders are innovative early entrants in large submarkets. Copyright Springer-Verlag 2012
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 22 (2012)
Issue (Month): 4 (September)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/journal/191/PS2|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Franco Malerba & Richard Nelson & Luigi Orsenigo & Sidney Winter, 2006.
"Vertical Integration and Dis-integration of Computer Firms: A History Friendly Model of the Co-evolution of the Computer and Semiconductor Industries,"
Papers on Economics and Evolution
2006-19, Philipps University Marburg, Department of Geography.
- Franco Malerba & Richard Nelson & Luigi Orsenigo & Sidney Winter, 2008. "Vertical integration and disintegration of computer firms: a history-friendly model of the coevolution of the computer and semiconductor industries," Industrial and Corporate Change, Oxford University Press, vol. 17(2), pages 197-231, April.
- Franco Malerba & Richard Nelson & Luigi Orsenigo & Sidney Winter, 2006. "Vertical Integration and Dis-integration of Computer Firms: A History Friendly Model of the Co-evolution of the Computer and Semiconductor Industries," KITeS Working Papers 191, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Dec 2006.
- Giulio Bottazzi & Giovanni Dosi & Marco Lippi & Fabio Pammolli & Massimo Riccaboni, 2001.
"Innovation and Corporate Growth in the Evolution of the Drug Industry,"
LEM Papers Series
2001/02, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- Bottazzi, Giulio & Dosi, Giovanni & Lippi, Marco & Pammolli, Fabio & Riccaboni, Massimo, 2001. "Innovation and corporate growth in the evolution of the drug industry," International Journal of Industrial Organization, Elsevier, vol. 19(7), pages 1161-1187, July.
- Winter, Sidney G., 1984. "Schumpeterian competition in alternative technological regimes," Journal of Economic Behavior & Organization, Elsevier, vol. 5(3-4), pages 287-320.
- Guido Buenstorf & Steven Klepper, 2009.
"Submarket Dynamics and Innovation: The Case of the U.S. Tire Industry,"
Papers on Economics and Evolution
2009-15, Philipps University Marburg, Department of Geography.
- Guido Buenstorf & Steven Klepper, 2010. "Submarket dynamics and innovation: the case of the US tire industry," Industrial and Corporate Change, Oxford University Press, vol. 19(5), pages 1563-1587, October.
- Comanor, William S, 1986. "The Political Economy of the Pharmaceutical Industry," Journal of Economic Literature, American Economic Association, vol. 24(3), pages 1178-1217, September.
- Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December.
- Franco Malerba & Richard Nelson & Luigi Orsenigo, 2003.
"Demand, innovation and the dynamics of market structure: the role of experimental users and diverse preferences,"
KITeS Working Papers
135, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jan 2003.
- Franco Malerba & Richard Nelson & Luigi Orsenigo & Sidney Winter, 2007. "Demand, innovation, and the dynamics of market structure: The role of experimental users and diverse preferences," Journal of Evolutionary Economics, Springer, vol. 17(4), pages 371-399, August.
- Breschi, Stefano & Malerba, Franco & Orsenigo, Luigi, 2000. "Technological Regimes and Schumpeterian Patterns of Innovation," Economic Journal, Royal Economic Society, vol. 110(463), pages 388-410, April.
- Steven Klepper & Peter Thompson, 2006. "Submarkets and the evolution of market structure," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 861-886, December.
- Franco Malerba & Luigi Orsenigo, 2002. "Innovation and market structure in the dynamics of the pharmaceutical industry and biotechnology: towards a history-friendly model," Industrial and Corporate Change, Oxford University Press, vol. 11(4), pages 667-703, August.
- Gambardella,Alfonso, 1995. "Science and Innovation," Cambridge Books, Cambridge University Press, number 9780521451185, December.
- repec:rje:randje:v:37:y:2006:i:4:p:861-886 is not listed on IDEAS
- Klepper, Steven, 1997. "Industry Life Cycles," Industrial and Corporate Change, Oxford University Press, vol. 6(1), pages 145-181.
- Christian Garavaglia & Franco Malerba & Luigi Orsenigo & Michele Pezzoni, 2010. "A History-Friendly Model of the Evolution of the Pharmaceutical Industry: Technological Regimes and Demand Structure," KITeS Working Papers 036, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Nov 2010.
- Jean-Michel Dalle, 1997. "Heterogeneity vs. externalities in technological competition: A tale of possible technological landscapes," Journal of Evolutionary Economics, Springer, vol. 7(4), pages 395-413.
- Matraves, Catherine, 1999.
"Market Structure, R&D and Advertising in the Pharmaceutical Industry,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 47(2), pages 169-194, June.
- Catherine Matraves, 1998. "Market Structure, R&D and Advertising in the Pharmaceutical Industry," CIG Working Papers FS IV 98-17, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Garavaglia, Christian, 2010. "Modelling industrial dynamics with "History-friendly" simulations," Structural Change and Economic Dynamics, Elsevier, vol. 21(4), pages 258-275, November.
- Ron Adner & Daniel Levinthal, 2001. "Demand Heterogeneity and Technology Evolution: Implications for Product and Process Innovation," Management Science, INFORMS, vol. 47(5), pages 611-628, May.
- Malerba, Franco, et al, 1999. "'History-Friendly' Models of Industry Evolution: The Computer Industry," Industrial and Corporate Change, Oxford University Press, vol. 8(1), pages 3-40, March.
- DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
When requesting a correction, please mention this item's handle: RePEc:spr:joevec:v:22:y:2012:i:4:p:677-709. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.