Innovation in Pharmaceutical Industry

One of the biotechs was Repligen, a Cambridge, Massachusetts, firm (founded in 1981) that specialized in efforts to develop treatments for cancer and inflammation, as well as AIDS. Typical in several regards of the new pattern of R&D was the experience of the Merck Research Laboratories (MRL). While pursuing in-house research, the firm also worked with two biotech companies on alternative approaches to HIV prevention with a vaccine or treatment. Later, Merck collaborated with MedImmune, Inc., a Maryland biotech, in an attempt to use that firm's monoclonal antibodies as a means of preventing HIV infection. The Merck/Repligen combination at first produced some promising results, but neither the vaccine research nor the explorations of monoclonal antibodies proved fruitful. Meanwhile, MRL's in-house research was successful in developing a novel antiretroviral therapy, Crixivan (indinavir). However, some researchers remained unconvinced with the results from such collaborations, because as Galambos and Sturchio assert, “large pharma has no real absorptive capacity to completely benefit from a strategy of merging with dedicated biotechnology firms”.

Opposing to the view of Galambos and Sturchio, other experts present several reasons to why large corporations successfully collaborate in innovation areas within one industry. According to some, the science base represents a magnet for information technology and biotechnology business. Colleges and universities with a high rate of generating significant innovations like University of California Medical School, San Francisco in medical research and Stanford in IT and biotechnology, can be considered as bases upon which commercialization of new knowledge is built. Logically, because scientific output represents an economic value it attracts both venture capital and pharmaceutical companies who have an interest in both utilizing the knowledge but also protecting their investment by placing their managers in the start-ups or acquired firms. In addition, small companies, especially in highly knowledge-driven industries, depend heavily on social capital (Cooke and Wills 1999).

Therefore, small innovative firms benefit from intellectual, technological and social "spillovers" based on network collaborations with other entrepreneurs, other scientists, financiers and companies in the same industry and with comparable mindsets to themselves. Unlike Galambos and Sturchio or other opposing specialists, Teece in regard to biochemical industry offered a term of “strategic alliances” or alliances in which both parties, in this case large pharmaceutical company and start-up research laboratory share their complementary assets.