Innovation in the Pharmaceutical Industry: The Process of Drug Discovery and Development - Innovation and Marketing in the Pharmaceutical Industry - page 64

success probabilities, suggesting some inherent deterrent in their harnessing of a rich
experience from multiple alliances (Hoang and Rothaermel 2005 ). The authors' expla-
nation invokes an argument from organizational behavior: in the relatively small biotech
fi rms, diverse alliance experiences can be easily concentrated in the hands of one key
individual (often the founder or a top-level manager), who is also more motivated to
learn from these experiences as alliances are particularly critical for the survival of small
fi rms. In large fi rms, the management of multiple alliances is often distributed across the
organization and is handled by different individuals. Such dispersion in the alliance
experiences makes the cumulative benefi ts harder to materialize. 24
In general, the consensus in the academic literature is that for pharmaceutical
and biotech fi rms alike, interfi rm cooperation has a positive impact on innovation
outcomes, particularly for a small number of alliance partners (Shan et al. 1994 ;
Deeds and Hill 1996 ; Rothaermel 2001a ). For biotech fi rms, access to public equity
markets and a well-embedded network position exert additional positive effects on
innovation outcomes (e.g., Shan et al. 1994 ).
The industry can benefi t tremendously from a more fi ne-grained understanding
of the rationale employed by different fi rms in their strategic choices regarding vari-
ous forms of partnership activity. Insights about the evolution of alliances and
assessment of the direct and indirect extra value they bestow on the partners can be
rather informative for future strategic decisions. It will be illuminating to examine
the interactions between different alliance types, to analyze the latent discrepancies
in the partners' interests, their reconciliation or resolution, and to study in detail the
impact of relevant environmental, organizational, managerial, or structural factors.
A better understanding of the potential synergies in the collaboration strategies of
pharmaceutical and biotech fi rms, along with a clear recognition of the potential
pitfalls, can guide fi rms toward systematic improvements in their partnering deci-
sions for innovation—a win-win situation all around.

2.3.6 The Business of Drug Innovation from an Academic

Perspective: Findings and Insights

Inventions are by default disruptive, which makes them relatively impenetrable to
attempts to explain or predict. Yet, examining the process of drug innovation for
pivot points that can introduce extra effi ciencies, along with studying the various
business models that arise in the industry are attractive areas for academic scrutiny.
Detailed datasets present new opportunities for testing complex model frameworks;
advanced estimation techniques enable the disentangling of interdependencies; the

24 Eli Lilly has established a dedicated function called Offi ce of Alliance Management to serve as
an “integrator, intermediary, and catalyst for best practice performance” (Hoang and Rothaermel
2005 ). This move is consistent with the suggested need for intraorganizational streamlining of
diverse alliance experiences.