INNOVATION MODELS IN THE BIOPHARMACEUTICAL SECTOR - Innovation in the Biopharmaceutical Industry - page 2

dependent on coupling these two forces together (see Tidd, 2006 for a detailed
discussion).
The relative value of “radical”, “incremental” and “imitative” new products, is
currently at the heart of a vigorous debate in the biopharmaceutical sector. More
recent research has focussed attention on the inherent dangers of basing government
policies, or corporate strategies on limited or partial models which fail to recognise
key features and interactions in the innovation process (Tidd et al ., 2005). Thus,
models which portray innovations only as major “breakthroughs” ignore the value
of incremental advances.
A central theme in Schumpeter's economic theory of innovation was “cre-
ative destruction” (Schumpeter, 1934). Abernathy and Utterback (1985) developed
a “discontinuous” model, in which there is an initial “fluid phase”, marked by
high uncertainty along the “target” and “technical” dimensions. The key uncer-
tainty along the target dimension relates to what the new configuration will look
like and who will want the innovation that emerges. The technical dimension
relates to the way new technological knowledge is harnessed to create and deliver
innovation.
No one knows what will be the “right” configuration of technological approach
and market needs, and so there is extensive experimentation, accompanied by
many failures, but there is also rapid learning by a range of players, including
new entrepreneurial entrants. Gradually, this experimentation converges around
a “dominant design”, which resets the rules of the game: this is what has hap-
pened in the transition from chemical to biological approaches to developing new
medicines.
Many of the existing players are able to build on this new trajectory. By leveraging
their accumulated knowledge, networks, skills and financial assets, they are able
to enhance their competence by building on this new opportunity (Tushman and
Anderson, 1987). Equally, while small entrepreneurial firms play an important role
in this early phase, there is strong ecological pressure on new entrants, with the result
that only the fittest or luckiest survive. This paper will illustrate the importance of
these ideas later on, when we analyse the evolving symbiotic relationship between
big pharmaceutical companies and small-to-medium sized enterprises (SMEs) that
are active in the field of biotechnology.
There is growing evidence that networking is a beneficial mode of operation in
innovation. Table 1 provides a summary of the many types of innovation networks
and the ways they are used.
Systems theory demonstrates that networks have emergent properties, i.e. the
whole is greater than the sum of all its parts. This approach, in which having the
right connections becomes as important as the actual generation and ownership of
knowledge, has been called “open innovation” by Chesborough (2003).