Proceedings of 5th Asia-Pacific Business Research Conference
17 - 18 February, 2014, Hotel Istana, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-44-3
Does Patent Predict Radical Innovation?- Focused on
Pharmaceuticals
Sooyune Jeon* and Wonjoon Kim**
Because the rate of dependence of drugs is expected to increase continuously due to
the aging society, the prospect of pharmaceutical industry is brighter than ever.
Especially, radical innovations can lead to more tremendous value to firms than
incremental innovation in Pharmaceutical industry. They offer opportunity to enter the
new market and threat market positions of competitors at the same time. However,
previous empirical research has simply assumed patent statistics as a proxy for
innovative activities. Therefore, we cast doubts on the representativeness of patents
as radical innovation indicators in pharmaceuticals because financial rewards of
radical innovation are tied closely to firm’s resource base. Consequently, we
investigate following questions: (1) Can patent predict radical innovation in
pharmaceutical industry? (2) If so, what about the patterns of network among radical
firms considering patent citation data? This paper examines that the relationship
between patent and radical innovation in pharmaceuticals. Also, this article identifies
the relations of pharmaceutical firms which conduct radical innovation using network
analysis. We objectively measure the radical innovation from 2002 to 2012 according
to the U.S. Food and Drug Administration (FDA)’s criteria of new molecular entity
(advancement in technology) and receiving priority review (advancement in customer
benefit), and collect data from USPTO and COMPUSTAT. The results show that
patents predict radical innovation better than random guessing. Moreover,
pharmaceutical firms have tendency of increasing technological breakthrough more
than radical innovation. These results suggest more empirical evidence related to
patent statistics.
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* Sooyune Jeon, Department of Business and Technology Management, KAIST, Republic of Korea
Email : jsy-529@kaist.ac.kr
** Prof. Wonjoon Kim, Department of Business and Technology Management, KAIST, Republic of Korea
Email: wonjoon.kim@kaist.edu