VERTICAL DE-INTEGRATION IN PHARMA INDUSTRY

Vertical De-Integration in Pharma Industry - Externalization of R&D Activities

Table of Contents

1. Introduction3

2. External R&D: Theoretical Perspectives to Date5

a. Determinants, Actors, Methods and Indicators6

b. Organization9

3. A Metamodel of External R&D Organization15

a. Variables Used in Theoretical Models15

b. Critical Perspectives19

c. The Proposed Metamodel20

4.The Metamodel of External R&D Organization Applied to Pharmaceutical23

Industry23

a. The Pharmaceutical Industry24

c. External R&D Structures in Pharmaceutical Industry31

5. Conclusions36

References39

Vertical De-Integration in Pharma Industry - Externalization Of R&D Activities

1. Introduction

The Externalization issue started to be studied extensively by academic scholars in the 60's (e.g. Vernon's product life cycle, 1967), yet only in the 80's emerged the first studies of externationalization of innovation or more specifically of R&D activities (e.g. Ronstadt's technology units, 1984). Some models of external R&D organization have been proposed (from centralized solutions to hierarchical networks 1, and lately to hybrid approaches focused on learning processes and open innovation}. Yet most lack validation or fail to apply to specific industries (which is a key concern of our research). This strongly limits their usefulness. For instance, the pharmaceutical industry needs to increase the efficiency of its R&D process, which is externally developed. There is a shortage of tangible, concrete solutions of external R&D management in this industry, and of clear understanding of applicable models of external R&D organization and its determinants.

Our research looks to fill in these gaps and focuses on two key questions: a) what models of external R&D organization (and corresponding actors/partners, determinants, and indicators) apply to pharmaceutical industry? b) How to manage the externationalization of the pharmaceutical R&D process in the current context of globalization, outsourcing and reduced effectiveness and efficiency of the process? So, we identify and validate models of external R&D applicable to the pharmaceutical industry, explaining associated aspects (e.g. actors involved, determinants and indicators) including implementation and management of such models. We use a mixed-methods approach aiming to achieve a realistic integrated perspective over the organization, operation and management of external pharmaceutical R&D, yet currently work in progress.

We analyzed existing theoretical models of external R&D organization between 1980 and 2005, performed an extensive and thorough comparative analysis, using a framework first proposed by Jorge Noisy in the Special Issue of Research Policy, in 1999, which we enriched with specific criteria. We identified key variables used in these models, and created a taxonomy based on qualitative analysis, with four top categories:

Technological Development, Resources, Market and Networks. Existing studies on external R&D organization cover insufficiently the four categories. There is a concentration in Technological Development and some possible emerging trends in Networks, and as all studies lack proper validation at a larger scale, there is need to further research all areas. There are some critical variables, which were not considered in any of the studies: e.g. intellectual property rights (especially patents), technology inland out-licensing, internal technological outputs and recombination, market regulation, or external/mixed networks. We argue these should be included and validated in future research, in any industry.

Next, we analyzed academic sources and secondary data on the ...