The Diffusion of Science-Driven Drug Discovery: Organizational Change in Pharmaceutical Research
Recent work linking the adoption of key organizational practices to productivity raises an important question: if adoption increases productivity so dramatically, why does adoption across an industry take so long? This paper explores this question in the context of one particularly interesting practice, the adoption of science driven drug discovery by the modern pharmaceutical industry. Over the past two decades, the established pharmaceutical industry has slowly shifted towards a more science-oriented drug discovery: (a) adopters experienced substantially higher rates of R&D after the late 1970s and (b) the rate of adoption across the industry was extremely slow. Motivated by the apparent contradiction between large boosts in performance and slow rates of adoption, this paper characterizes the sources of differences in rates of adoption between 1980 and 1993. The principal finding is that adoption of a science-oriented research approach was a function of initial conditions, or subject to 'state dependence': some firms simply began the sample period at a much higher level of science orientation. Moreover, while these effects attenuated over time, our empirical results suggest that it took more than ten years before adoption was unrelated to initial conditions. In addition, consistent with theories developed in the context of technology adoption, we find that relative diffusion rates depend on the product market positioning of firms. More surprisingly, adoption rates are seperately driven by the composition of sales within the firm. This latter finding suggests the potential importance of differences among firms in terms of the internal structure of power and attention, an area which has received only a small amount of theoretical attention.
|Date of creation:||Sep 1999|
|Date of revision:|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
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.:
- Susan Helper, 1997. "Complementarity and Cost Reduction: Evidence from the Auto Supply Industry," NBER Working Papers 6033, National Bureau of Economic Research, Inc.
- Edward P. Lazear, 2000.
"Performance Pay and Productivity,"
American Economic Review,
American Economic Association, vol. 90(5), pages 1346-1361, December.
- Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, vol. 80(3), pages 511-28, June.
- Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-26, June.
- Hicks, Diana, 1995. "Published Papers, Tacit Competencies and Corporate Management of the Public/Private Character of Knowledge," Industrial and Corporate Change, Oxford University Press, vol. 4(2), pages 401-24.
- Daniel A. Levinthal, 1997. "Adaptation on Rugged Landscapes," Management Science, INFORMS, vol. 43(7), pages 934-950, July.
- Jennifer F. Reinganum, 1981.
"Market Structure and the Diffusion of New Technology,"
Bell Journal of Economics,
The RAND Corporation, vol. 12(2), pages 618-624, Autumn.
- Reinganum, Jennifer F., . "Market Structure and the Diffusion of New Technology," Working Papers 360, California Institute of Technology, Division of the Humanities and Social Sciences.
- Dasgupta, Partha & David, Paul, 1985. "Information Disclosure and the Economics of Science and Technology," CEPR Discussion Papers 73, C.E.P.R. Discussion Papers.
- Iain Cockburn & Rebecca Henderson & Scott Stern, 1999. "Balancing Incentives: The Tension Between Basic and Applied Research," NBER Working Papers 6882, National Bureau of Economic Research, Inc.
- Rebecca Henderson, 1993. "Underinvestment and Incompetence as Responses to Radical Innovation: Evidence from the Photolithographic Alignment Equipment Industry," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 248-270, Summer.
- Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September.
- Jensen, M.C. & Murphy, K.J., 1988.
"Performance Pay And Top Management Incentives,"
88-04, Rochester, Business - Managerial Economics Research Center.
- Jovanovic, Boyan, 1979. "Firm-specific Capital and Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1246-60, December.
- Zucker, Lynne G & Darby, Michael R & Brewer, Marilynn B, 1998. "Intellectual Human Capital and the Birth of U.S. Biotechnology Enterprises," American Economic Review, American Economic Association, vol. 88(1), pages 290-306, March.
- Anita M. McGahan & Michael E. Porter, 1999. "The Persistence of Shocks to Profitability," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 143-153, February.
- Henderson, Rebecca. & Cockburn, Iain., 1994. "Measuring competence? : exploring firm effects in pharmaceutical research," Working papers 3712-94., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Milgrom, Paul R & Qian, Yingyi & Roberts, John, 1991. "Complementarities, Momentum, and the Evolution of Modern Manufacturing," American Economic Review, American Economic Association, vol. 81(2), pages 84-88, May.
- Casey Ichniowski & Kathryn Shaw & Giovanna Prennushi, 1995. "The Effects of Human Resource Management Practices on Productivity," NBER Working Papers 5333, National Bureau of Economic Research, Inc.
- Gambardella,Alfonso, 1995. "Science and Innovation," Cambridge Books, Cambridge University Press, number 9780521451185, November.
- Caves, Richard E, 1980. "Industrial Organization, Corporate Strategy and Structure," Journal of Economic Literature, American Economic Association, vol. 18(1), pages 64-92, March.
- Lynne G. Zucker & Michael R. Darby, 1995. "Present at the Revolution: Transformation of Technical Identity for a Large Incumbent Pharmaceutical Firm After the Biotechnological Breakthrough," NBER Working Papers 5243, National Bureau of Economic Research, Inc.
- Heckman, James J, 1991. "Identifying the Hand of the Past: Distinguishing State Dependence from Heterogeneity," American Economic Review, American Economic Association, vol. 81(2), pages 75-79, May.
- Cockburn, Iain M & Henderson, Rebecca M, 1998. "Absorptive Capacity, Coauthoring Behavior, and the Organization of Research in Drug Discovery," Journal of Industrial Economics, Wiley Blackwell, vol. 46(2), pages 157-82, June.
- Susan Athey & Scott Stern, 1998. "An Empirical Framework for Testing Theories About Complimentarity in Organizational Design," NBER Working Papers 6600, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:7359. 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: ()
If references are entirely missing, you can add them using this form.