When the drugs (don’t) work: The role of science in product commercialization

While the relationship between science and firms' innovation performance has been extensively studied, little is known about how the nature of scientific input affects successful product commercialization. This paper aims to address this gap by analyzing data linking scientific publications to the eventual product market outcomes of early-stage drug candidates in the pharmaceutical industry. Examining the basic and applied nature of the scientific knowledge base underlying 5,613 early-stage drug candidates from 1995 to 2008, I find that despite the importance of advances made in basic science, its predictive and abstract outcomes on their own are unlikely to foster the development of drug candidates that achieve market approval. The substantial gap between the predictive rules from basic research and the unpredictable outcomes that emerge in variable states of human physiology, seems to limit the extent to which fundamental insights from basic science reduce the uncertainty related to the complexity of the human body in the real-world environment. In contrast, I show that early-stage drug candidates that combine fundamental insights from basic research and contextualized insights from applied science are significantly more likely to achieve market approval. This effect is particularly pronounced when these drugs have a more novel character and when firms leverage their own contextualized insights in the development of these drugs.