Session 4
박민아
Competitive advantage from in-house scientific research: The US pharmaceutical
industry in the 1980s
Alfonso Gambardella
Investment in in-house R&D is not only a mean to develop innovation internally but
also to connect to external knowledge source. The paper focuses on the relationship between
external scientific knowledge and in-house scientific research. While some argue that firm can
take advantage of external knowledge produced by non-profit research and academia at no
cost, the paper is dealing with cost of utilizing external science. By illustrating six
pharmaceutical firms and their paths, the role of in-house research on sensing the opportunity
is highlighted. Merek and Eli Lilly had high research skill. Merek provided favorable
environment to researchers by allowing autonomy and control over resource allocation to the
scientist. Combination of motivating scientist to unexplored area and deductive scientist
method based upon available knowledge led to innovation of new drugs and success in the
market. Eli Lilly’s investment in learning new computer design method and using the finding
of protein receptor from out-side of firm, also provided competitive edge. On the hand,
other’s failure of rapid catching of research or reinvestment profit to development of new
drug and being one-drug company led losing their competitive strategy. The examples of US
pharmaceutical companies have shown that the internal R&D helps firm to stay connected to
scientific community. Being in the part of community allow the absorbance of external
knowledge.
The paper claims that the external knowledge might seem to be cost-free however to
absorb and utilize the information to create product, internal in-house R&D plays a critical
role. The focus was on the scientific findings produced by academia and non-profit research. I
wonder that different type of information could acquire different mechanisms to be transferred
in to the firm. For example, obtaining external knowledge of know-how or process on
research seems to need further effort than staying connected to the network. The market these
firms are competing in is very flux and amount of information is very large and diverse,
therefore, being part of community does not seem enough to create and maintain the
competitive advantage. In this case, the external knowledge can be not as straight forward as
scientific findings. There could be confusion during the process of importing and
understanding the information. Also the author limited the source of external knowledge to
academia and non-profit research and ignored the exchange knowledge between firms. The
information transfer during joint research seems to take a big part in uptake of external
information however there was no mention regard this issue.
Interorganizational collaboration and the locus of innovation: Networks of learning in
biotechnology
Walter W. Powell, Kenneth W, Koput, Laurel Smith-Doerr
In the environment where knowledge is rapidly developing, it is almost impossible
for a single firm to cover the entire available information. This calls for combination of
complementary assets between firms and external collaboration such as R&D partnership,
joint venture, and interfirm alliance. Collaboration helps organizational learning by providing
skill and resource they lack and external source of innovation from scientific community. The
paper attempted to observe network structure among biotechnology and explain the reason for
collaboration. When knowledge is dispersed and diversified, the chance for innovation is
found at a network of interorganizational relationship, according to the author. In such
situation, the role of R&D providing diverse network activity is emphasized. The hypothesis
was that the more experienced in alliance, the firm can position themselves in more central
connectedness and centrality in a network offers greater number of collaboration or more
rapid growth. The result indicated that number of external ties grow incrementally and
support faster growing. The cycle of learning in the biotechnology network is shown in the
paper as a figure. Experience in network and other non R&D ties support diversity followed
by centrality. Centrality further support R&D alliance and growth of firms.
The author observed the pattern of collaboration and learning cycle in biotechnology.
However as author mentioned the pattern was observed in five years with emerging field. It
can be different when longer time period and different industry was selected. Also the
learning of the organization is stated several time but it could help further for reader to grasp
the point if the learning has been more specified. There are different types and levels of
learning. Lack of the explanation made it hard to understand the paper fully. Lastly, the cycle
of learning is iterative in the figure however the possibility of cycle being broken by
unexpected events or catastrophe is not explained. For example, radical technological shift of
industry initiated outside of alliance would cause the stoppage of cycle. Other factors causing
the disturbance of cycle need to be further studied.
Markets for technology and their implications for corporate strategy
Ashish Arora, Andrea Fosfuri, Alfonso Gambardella
Until early 20th century, R&D and complementary assets for innovation used to exist
within the firm however, market for technology allowing exchange of technology and
licensing technology experienced rapid growth in the past two decades. In the market, firm
plays both roles: user and supplier of technology. In the absence of the market, in order for a
firm to make a profit, technology has to be further exploited in-house and embodied into a
product, and complementary asset for the process need to be acquired. However, within the
market, lack of complementary asset does not matter, because technology itself can be a
source of profit by licensing. Especially when the technology is easily replicated and
transferred, licensing is preferred. Decision of in-house research depends on existance of
complementary assets, so it is usually more suitable for large firm but small profit caused by
fierce competition in the product market often led corporate venturing or licensing. Larger
firm have tendency to focus on incremental innovation rather than radical innovation, and
new technology is often employed as spin off and in new venture. However since the process
depends on slack resource which is barely available, the firm chooses to license the
technology. In case of smaller firm, the decision has to be made between acquiring technology
or complementary asset to commercialize product, which is a risky for a smaller firm. Even
though firm affords to acquire complementary asset, often it become burden in the future, by
requiring firm to develop new technology to ‘feed’ complementary assets. Also the growth of
firm size by the acquirement can induce the change of firm culture leading to favor
exploitation than exploration. Due to the emergence of technology market, technology is no
longer source of competitive advantage, so firm needs to look for other competitive assets and
develop close relationship with customers to understand their specific need.
Overall, the paper points out the emergence of technology market as a game changer
and showed changes in strategy of firm coping with it. The paper points out the weakness of
smaller firm’s lack of complementary assets such as land and physical equipment. However
there is a feeling that the author overlooked the fact that nowadays those assets are not
necessarily required to produce product if the product is intangible or offered online. Also the
importance of technology market is illustrated but detailed explanation on market such as
difference from traditional market was missing.