Process Innovation in the Pharmaceutical Industry

38 Pages Posted: 25 Oct 2018

See all articles by Ivan Lugovoi

Ivan Lugovoi

HEC Paris

Dimitrios Andritsos

HEC Paris - Operations Management and Information Technology

Claire Senot

Tulane University

Date Written: October 01, 2018

Abstract

Problem definition: Process innovation is commonly claimed to be a major source of competitive advantage for firms. Despite this perceived influence it has received substantially less attention than product innovation and much uncertainty remains about its true association with firm performance. We investigate the relationship between a pharmaceutical manufacturing firm's process-innovation portfolio and its economic performance.

Academic/Practical relevance: Our study uniquely conducts a multi-dimensional evaluation of a firm's portfolio of process innovations at the product level. This allows a quantitative evaluation of both the relative benefit of the different dimensions of a portfolio as well as the potential complementarities between these.

Methodology: Through a collaboration with expert patent attorneys we develop a unique longitudinal dataset that combines secondary data and evaluations of a firm's portfolio of process patents along three key dimensions: novelty, scope, and locus. We conduct econometric analyses for a large-scale sample of drugs open to competition from generics, where process innovation is the main source of competitive advantage.

Results: We find a positive association between overall process innovation and firm performance. When differentiating between dimensions of process innovation, results further suggest that high novelty is beneficial, and complemented by a broad scope, but only for patents applying to the later phase of the pharmaceutical manufacturing process.

Managerial Implications: Our results provide important practical insights that can inform process-related R&D investments in the pharmaceutical sector. In particular, it may not be economically beneficial to invest in high-novelty process innovations in early production stages, which are characterized by numerous opportunities to innovate with potentially higher but less predictable economic payoffs. On the other hand, at later stages of the production process, where the opportunities to innovate are less numerous with potentially lower but more predictable economic payoffs, portfolios that are jointly characterized by high novelty and high scope could be more valuable.

Suggested Citation

Lugovoi, Ivan and Andritsos, Dimitrios and Senot, Claire, Process Innovation in the Pharmaceutical Industry (October 01, 2018). HEC Paris Research Paper No. MOSI-2018-1314. Available at SSRN: https://ssrn.com/abstract=3272776 or http://dx.doi.org/10.2139/ssrn.3272776

Ivan Lugovoi

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Dimitrios Andritsos (Contact Author)

HEC Paris - Operations Management and Information Technology ( email )

1, rue de la Liberation
Jouy en Josas, 78351
France

Claire Senot

Tulane University ( email )

6823 St Charles Ave
New Orleans, LA 70118
United States

HOME PAGE: http://clairesenot.com

Register to save articles to
your library

Register

Paper statistics

Downloads
60
rank
346,817
Abstract Views
435
PlumX Metrics