Technological Discontinuities and the Comparative Strategic Value of New Capabilites: Evidence from the Comparison of Small- and Large-Molecule Targeted Anti-Cancer Drug Discovery

Traditional creative destruction theories distinguish disruptions as competence-destroying or competence-enhancing to incumbents’ capabilities, with the former case resulting in incumbents’ loss of competitive advantage in in-house R&D performance (even if complementary assets aid in retaining final market share). In this paper, I propose that attention to the extent of competence destruction is necessary but not sufficient for analyses of competitive advantage in R&D through a technological discontinuity. A full analysis requires the comparison of the value added and ease of access (i.e., strategic value) of all capabilities, old and new. In other words, an analysis of competition during a transition requires assessment not only of how many of the old capabilities were lost but also what it takes to acquire the new ones. I find evidence for this proposition in qualitative and quantitative data from the transition of anti-cancer drug discovery from standard chemotherapy to targeted therapies. Among targeted therapies, I compare two variants, small- vs. large-molecule drugs, which though equally competence-destroying to chemotherapy-based drug discovery, differ in that large-molecule drugs require one more new capability: expertise in biopharmaceutical technology. By tracing the origin and evolution of biopharmaceutical technology, as well as its comparative value added, I can show a contrast in results: incumbents led in small-molecule targeted drug discovery; but they fell behind biopharmaceutical technology pioneers in large-molecule targeted drug discovery, where one of the new capabilities (i.e., expertise in biopharmaceutical technology) had higher value added and was more difficult to acquire than other new capabilities.R&D capabilities; incumbents; technological disruption; competence enhancing

Do Firms Benefit from Being Present in Multiple Technology Clusters? An Assessment of the Technological Performance of Biopharmaceutical Firms

Firms active in knowledge-intensive fields are increasingly organizing their R&D activities on an international scale. This paper investigates whether firms active in biotechnology can improve their technological performance by developing R&D activities in multiple technology clusters. Regions in the US, Japan and Europe, that host a concentration of biotechnology activity are identified as clusters. Fixed-effect panel data analyses with 59 biopharmaceutical firms (period 1995-2002) provides evidence for a positive, albeit diminishing (inverted-U shape) relationship between the number of technology clusters in which a firm is present and its overall technological performance. This effect is distinct from a mere multi-location effect.region, clusters, biotechnology, technology clusters

An efficient multiple imputation algorithm for control-based and delta-adjusted pattern mixture models using SAS

In clinical trials, mixed effects models for repeated measures (MMRM) and pattern mixture models (PMM) are often used to analyze longitudinal continuous outcomes. We describe a simple missing data imputation algorithm for the MMRM that can be easily implemented in standard statistical software packages such as SAS PROC MI. We explore the relationship of the missing data distribution in the control-based and delta-adjusted PMMs with that in the MMRM, and suggest an efficient imputation algorithm for these PMMs. The unobserved values in PMMs can be imputed by subtracting the mean difference in the posterior predictive distributions of missing data from the imputed values in MMRM. We also suggest a modification of the copy reference imputation procedure to avoid the possibility that after dropout, subjects from the active treatment arm will have better mean response trajectory than subjects who stay on the active treatment. The proposed methods are illustrated by the analysis of an antidepressant trial.Comment: 27 page

Organizational Scope and Investment: Evidence from the Drug Development Strategies and Performance of Biopharmaceutical Firms

This paper compares the clinical trial strategies and performance of large, established ("mature") biopharmaceutical firms to those of smaller ("early stage") firms that have not yet successfully developed a drug. We study a sample of 235 cancer drug candidates that entered clinical trials during the period 1990-2002 and were sponsored by public firms. Early stage firms are more likely than mature firms to advance drug candidates from Phase I to Phase II clinical trials. However, early stage firms have much less promising clinical results in their Phase II trials and their Phase II drug candidates are also less likely to advance to Phase III and to receive Food and Drug Administration approval. This pattern is more pronounced for early stage firms with large cash reserves. The evidence points to an agency problem between shareholders and managers of single-product early stage firms who are reluctant to abandon development of their only viable drug candidates. By contrast, the managers of mature firms with multiple products in development are more willing to drop unpromising drug candidates. The findings appear to be consistent with the benefits of internal capital markets identified by Stein (1997).

Sample size for comparing negative binomial rates in noninferiority and equivalence trials with unequal follow-up times

We derive the sample size formulae for comparing two negative binomial rates based on both the relative and absolute rate difference metrics in noninferiority and equivalence trials with unequal follow-up times, and establish an approximate relationship between the sample sizes required for the treatment comparison based on the two treatment effect metrics. The proposed method allows the dispersion parameter to vary by treatment groups. The accuracy of these methods is assessed by simulations. It is demonstrated that ignoring the between-subject variation in the follow-up time by setting the follow-up time for all individuals to be the mean follow-up time may greatly underestimate the required size, resulting in underpowered studies. Methods are provided for back-calculating the dispersion parameter based on the published summary results

Do firms benefit from being present in technology clusters? Evidence from a panel of biopharmaceutical firms.

This paper investigates whether firms active in biotechnology can improve their technological performance by developing R&D activities in technology clusters. Regions that host a concentration of biotechnology activity are identified as technology clusters (level of US states, Japanese prefectures and European NUTS2 regions). A fixed effect panel data analysis on a set of 59 biopharmaceutical firms (period 1995-2002) provides evidence for a positive, albeit diminishing (inverted-U shape) relationship between the number of technology clusters in which a firm is present and its total technological performance. This effect is distinct from a mere multi-location effect.Cluster; Innovation; Biotechnology;

Health biotechnology in China: National, regional, and sectoral dimensions

Biotechnology is one of the knowledge fields particularly targeted by China, as it is considered to open up windows of opportunity for catch-up to the leading economies. However, the seizing of these opportunities requires the existence of an institutional and organizational structure supportive of the introduction and usage of biotechnological knowledge. The present contribution discusses this problem in its national, regional, and sectoral dimensions. By focusing on the biopharmaceutical sector, it is shown that the regulatory environment and the capital market constitute serious bottlenecks to further development. --China,health biotechnology,innovation system,pharmaceutical