MEASURING COMPETENCE? EXPLORING FIRM EFFECTS IN PHARMACEUTICAL RESEARCH

1. MEASURING COMPETENCE? EXPLORING FIRM EFFECTS IN PHARMACEUTICAL RESEARCH Rebecca Henderson Iain Cockbum Strategic management Journal(1994) ---Presented by Qing YANG & Pei-Lin YOU

2. MOTIVATION • A revival of interest in “ the resource-based view of the firm” • Sources of competitive advantage: inimitable firm heterogeneity, unique competences or capabilities& industry structure • Empirical work is still at a preliminary stage • Measures of Competence at an aggregate level, or individual firms, no systematic studies or no large-scale statistical studies • Two Puzzling questions introduce by the previous paper • Firm-specific enduring sources of heterogeneity (firm fixed effects & variations in portfolio structure across firms were both large and persistent-‘Scale, scope and spillovers: the determinants of research productivity in drug discovery • Idiosyncratic research capabilities are an important source of ‘competence’ in science- and technology-driven industries

3. THIS PAPER’S FOCUS: • Explores the nature of firm effects and the role of ‘competence’ in pharmaceutical research by • Construct a variety of measures of ‘ competence’ in both firm level and research program level data • Findings for firms • ‘Architectural competence” , + associated with research productivity • Maintain links to the wider scientific community……., + productive in drug discovery • Manage the allocation of key research resources through collaborative rather than dictatorial processes, + productive in drug discovery

4. EXPLORING PROCEDURES • Distinguish between ‘ component competence’ and ‘ Architectural competence’ • Component Competence • Local abilities and knowledge that are fundamental to day-to-day problem-solving: • ‘resources ’ , ’knowledge and skills’ or technical systems’ • Architectural Competence • the ability to use these component competence • ‘capabilities ’ , ’integrative capabilities’, ‘dynamic capabilities ’ , ‘implicit/social’ or ‘collective knowledge, ‘organizational architecture’, ‘combinative capabilities’, ’managerial systems’ and ‘values and norms’, and ‘invisible assets’

5. COMPONENT COMPETENCE • Hypothesis1: • Drug discovery productivity = +ƒ(firm-specific expertise) in particular disciplinary areas • Hypothesis2: • Drug discovery productivity = +ƒ(component competence) in particular disciplinary areas • Why think so? • How to measure? • Test results? ？

6. COMPONENT COMPETENCE • Why think so? • Previous researches supporting: locally embedded knowledge and skills may be a “competence” or a source of Competitive Advantage Tactit knowledge(Leonard-Barton,1992) \Local capabilities(Teece et al,1992) • Two dimensions in pharmaceutical research develop local competencies • Unique disciplinary expertise • Modern drug discovery require the input of multi-disciplines: molecular biology/physiology/biochemistry…& qualitative analysis • Important component competence may be developed in particular disease • Disease areas are too complex, so need groups of disciplinary specialists working together, & a previous investment

7. COMPONENT COMPETENCE • How to measure the productivity of drug discovery? • Difficulty: Generally, the long-term survival of the firm/sales/profitability, and market share, but the research competencies of pharmaceutical firms: Exceedingly risky, time-consuming, return highly skewed • By counts of “important” patents ( science-incentive industries ) • Y=f(x, ß); E[yit]=it=exp(xit ß+εit) • Y: patent counts (generated by a Poisson Process ) • X: a vector of inputs to the drug discovery (core competencies) • ß: a vector of parameter • ε: follows the gamma distribution • New Drug applications(INDs)/Approvals(NDAs)/sales/market shares • How to measure Organizational competence? • Unable to test H1 without comprehensive data about the distribution of Disciplinary skills • Introduce the KPATS: the stock of patents for H2

8. ARCHITECTURE COMPETENCE • Hypothesis3: • Firms with the ability to encourage & maintain an extensive flow of information across the boundaries of the firm + productive drug discovery efforts • Hypothesis4: • Firms that encourage & … across the boundaries between scientific disciplines and therapeutic classes within the firm + productive drug discovery efforts ？

9. ARCHITECTURAL COMPETENCE • Why think so? • Prior research & the qualitative work suggests: particularly important as sources of enduring competitive advantage in Pharmaceutical research • The ability to access new knowledge from outside the boundaries of the organization • The ability to integrate knowledge flexibly across disciplinary and therapeutic class boundaries within the organization • Research performance is positively associated with the ability to span the boundaries of the firm in turbulent science-driven environment (Allen 1977…) • Successful drug discovery also requires the ability to integrate knowledge across both disciplinary and disease area boundaries within firm • High performance is associated with … encourage the exchange of information across “component” boundaries within the firm

10. ARCHITECTURAL COMPETENCE • How to measure architectural capabilities? • PROPUB: Publication record and reputation as the criterion for promotion • GEOG/UNIV: the degree to promote the flow of information across firms boarders close to (RU) research university & joint research project with RU • Highly correlated , then only PROPUB included (?) in H3 • ‘symptoms’ of the presence of architectural competence • CROSS: the degree of the communication within the programs • GLOBAL: the degree of management geographically in a global research separate units or a seamless whole unit? • DICTATOR: Allocate resource by decentralized or by a single individual • These measures in the extent to which they vary within and between firms?

11. FINDINGS FOR FUTURE RESEARCH • Support : the ability to integrate knowledge both across the boundaries of the firm and cross disciplines and product areas within the firm is an important source of SA • Research productivity certainly increases with historical success… • Differences in local capabilities play an important role in shaping differences between firms • Architectural competence (publication records/committees) + correlated with research productivity • Small changes in the ways in which research is managed inside the firm appear to have major implications for its productivity • Not sure? • Cannot convincingly separate the effects of local competence in a particular field from other sources of unobserved heterogeneity • The measures of architectural competence are also subject to problems of interpretation (PROPUB /DICTATOR?) • Beyond the pharmaceutical industry to other research intensive settings

12. 非常感谢大家！ Thanks for your attention!