Innovation in the Pharmaceutical Industry: The Process of Drug Discovery and Development - Innovation and Marketing in the Pharmaceutical Industry - page 42

& Co. with psychiatric disorders, or GlaxoSmithKline with infectious diseases) are
more effective than the relative novices in the category at converting R&D efforts
into approved drugs (Chandy et al. 2006 ).
Scale effects can accumulate over time. Specifi cally, the fi rm's cumulative tech-
nological experience in a therapeutic category has been associated with increases in
the fi rst year sales of a new drug from that category (Nerkar and Roberts 2004 ). It
remains to be examined whether: (a) technological experience confers market
advantages due to measurable improvements in drug quality, safety, or effi cacy; (b)
the effects are reputation-based and largely perceptual (and if so, if it is the physi-
cians'-, the pharmacists'-, or the patients' impressions that are of greater conse-
quence); or (c) the positive impact stems from largely intangible fi rm assets, e.g.,
tacit knowledge about the category, special expertise with the core technologies,
effective professional contacts and network leverage, or greater familiarity with the
market gained during the fi rm's previous launches in these categories. As this is an
area of immense signifi cance to drug manufacturers, more research disentangling
the possible determinants of an experience-based sales boost for a new drug will be
rather welcome.
Economies of scope in drug discovery . Competent deployment of integrative knowl-
edge spanning different therapeutic categories may give rise to a richer set of novel
ideas. It can also foster ingenious approaches and problem solutions. Internal spill-
overs of new know-how may galvanize the process of drug discovery by leveraging
the inimitable asset of tacit knowledge that is proprietary to the fi rm.
Substantial economies of scope can ensue if the same amount of R&D in one
therapeutic class produces valuable fi ndings with favorable implications for another
therapeutic class or category. Such positive crossover effects can emerge when
knowledge acquired in the course of studying one disease can propel the research
done in another program. Cross-fertilization between therapeutic categories can
also occur—e.g., research programs focused on cardiovascular issues have brought
about therapies related to the central nervous system (Henderson and Cockburn
1996 ). Internal spillovers of know-how will depend, however, on the presence of
suffi cient breadth of knowledge at the fi rm. Such profi ciency will facilitate the rec-
ognition of diverse opportunities for asset redeployment stemming from the new
discoveries.
Developing the foresight to identify therapeutic potential outside of the focal
research area can be of immense value to the fi rm. First, drug candidates can be repo-
sitioned and projects can be redirected instead of terminated. 12 Second, even if a proj-
ect fails or gets terminated, the accumulated specifi c knowledge will not simply
vanish. Such knowledge remains within the fi rm and can be internalized or assimi-
lated in subsequent work, potentially aiding other innovation projects. Competencies,
experience, and insights developed during failed projects can be as important as those
12 Pfi fi zer discovered the key compound in what was to become the blockbuster hit Viagra ® during
Phase 1 of clinical trials for two totally different indications—high blood pressure and ischemic
heart disease. When its effi cacy for erectile dysfunction became apparent, Pfi zer was quick to
change research directions and made Viagra ® one of the most successful drugs in history.