INNOVATION MODELS IN THE BIOPHARMACEUTICAL SECTOR - Innovation in the Biopharmaceutical Industry - page 3

Table 1. Typology of innovation networks.

Type of innovation network Primary purpose/innovation target

New product or process
development consortium

Sharing knowledge and perspectives to create and market
new product or process concepts

Sectoral forum Shared concern to adopt and develop innovative best

practices

Technology consortiums Sharing and learning around newly emerging technologies

Emerging standards Exploring and establishing standards around innovative

technologies

Clusters Regional grouping of companies to exploit innovation

synergies

Appropriating the Value of Innovation

Innovation creates value which is shared between stakeholders. Teece (1987) argues
that, over the long run, four parties share the value generated by innovations: cus-
tomers, innovators, imitators and other followers. Frequently, the customer can be
adjudged to have been the most substantial beneficiary. The extent to which the
innovator captures value will depend upon how long the innovation can be pro-
tected from imitators, i.e. its sustainability, which, in turn, depends not only upon
the legal mechanisms for intellectual property (IP) protection (patents, trademarks
and copyrights), but also upon the complexity and ownership of tacit knowledge
and the skills required to exploit it.
Comparative analyses have demonstrated a wide variation in the extent to
which formal IP protection is essential for enabling the innovator to capture value
(Mansfield, 1986). Pharmaceuticals have always emerged from these studies as the
sector that is most dependent upon formal patent protection.
The commercialisation process is also vitally important to appropriation.
Manufacturing, distribution and marketing of new products all involve specialist
complementary assets, which are important in determining appropriability and sus-
tainability and not readily available to imitators. Global marketing reach is the
essential complement to intensive R&D investment in many “high tech” sectors,
including pharmaceuticals.

Diffusion and Adoption of Innovations

The diffusion of an innovation is typically described by an S-shaped (logistic) curve.
Initially, the rate of adoption is low, and confined to “innovators”. Next come the
“early adopters”, then the “late majority”, and finally, with the “laggards” the curve
tails off (Rogers, 1962).