Innovation, collaboration, and outsourcing: An exploratory study of the U.S. biopharmaceutical sector
Sen, Arup K.
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This dissertation examines the role of external collaboration and outsourcing in the innovation performance of U.S firms in the biopharmaceutical industry. Particular attention is given to the small and medium-sized (SME) segment of the biopharmaceutical industry, its role in research and development, and its reliance on external knowledge sourcing. In this industry, research on innovation has focused primarily on major biopharmaceutical companies based on existing theoretical frameworks on technological change in large corporations. However, there has been little empirical work on the innovative activity of SMEs within the biopharmaceutical industry, notably with regard to their collaborative partnerships and external linkages. Evidence from a sample of 86 companies suggests that firms outsource various technical activities to support new product development, and that most firms operate with networks of outside suppliers and research partners (including biotechnology companies). However, patent counts are not correlated with current levels of outsourcing for any of the three size-classes of firms (i.e., small, medium, and large). The study also suggests that external collaboration is not correlated with the various outsourcing categories, and this also holds true for all size-classes of firms. The importance of locating within a biopharmaceutical or biotechnology cluster appears to be of minor importance to SMEs, which is in stark contrast with larger firms. Approximately half of the survey firms serve foreign export markets, though there is no relationship between innovation performance and levels of international orientation. Most of the firms in this industry are research-intensive, relatively young, and actively involved in new product development. The major findings of the study are as follows. First, innovation performance can be conceptualized in terms of an inverted-U with respect to company size. Medium-sized firms are found to be the most export-intensive, the most innovation-driven, and the most successful outsourcers in terms of cost reduction. Second, for both SMEs and large firms, levels of R&D outsourcing have been going down over the past ten years. This is true for every firm in the sample. The main reason for this trend is that R&D outsourcing has not spurred innovation, nor has it proven to be cost-effective. Third, a variety of hypothesized linkages between innovation rates and levels of outsourcing or external collaboration turn out to be unsupported by the data. Specifically, it was initially hypothesized that levels of outsourcing and/or external collaboration would support the business efficiency of the survey firms. Collaborative activity was hypothesized to support product innovation, whereas outsourcing was hypothesized to generate major cost savings. These expectations were not confirmed by the data. I argue that this is because the biopharmaceutical industry as a whole has embraced the outsourcing and/or external collaboration mode of product development. Finally, most firms in the sample have incorporated biotechnology into their product development efforts - which is a relatively new phenomenon.