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Innovation and Strategic Divergence: An Empirical Study of the U.S. Pharmaceutical Industry from 1920 to 1960

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  • Jeho Lee

    (Graduate School of Management, Korea Advanced Institute of Science and Technology, 207-43Cheongryangri-dong, Dongdaemun-gu, Seoul 130-012, Korea)

Abstract

Today, firms employing two distinct survival strategies---(1) innovation and (2) imitation ---coexist in the U.S. pharmaceutical industry. History indicates that this intraindustry heterogeneity did not exist prior to 1940. This study empirically investigates the origin of this strategic divergence by focusing on changes in firms' R&D inputs and outputs. It finds that some U.S. pharmaceutical firms responded to the opportunity presented by the discovery of antibiotics in the 1940s by investing more in R&D, while many others did not. Over time, the innovators dominated in developing new drugs, and the gap between innovators and imitators steadily increased. These findings also shed light on Üthe genesis of strategic groups,Ý a phenomenon that is not yet well understood.

Suggested Citation

  • Jeho Lee, 2003. "Innovation and Strategic Divergence: An Empirical Study of the U.S. Pharmaceutical Industry from 1920 to 1960," Management Science, INFORMS, vol. 49(2), pages 143-159, February.
    • Handle: RePEc:inm:ormnsc:v:49:y:2003:i:2:p:143-159
    DOI: 10.1287/mnsc.49.2.143.12745
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    References listed on IDEAS

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    Cited by:

    1. Jeho Lee & Jaeyong Song & Jae-Suk Yang, 2016. "Network structure effects on incumbency advantage," Strategic Management Journal, Wiley Blackwell, vol. 37(8), pages 1632-1648, August.
    2. Chang, Sungyong & Kim, Hyunseob & Song, Jaeyong & Lee, Keun, 2024. "Dynamics of imitation versus innovation in technological leadership change: Latecomers’ catch-up strategies in diverse technological regimes," Research Policy, Elsevier, vol. 53(9).
    3. Tim Swift, 2016. "The perilous leap between exploration and exploitation," Strategic Management Journal, Wiley Blackwell, vol. 37(8), pages 1688-1698, August.
    4. Furman, Jeffrey L. & MacGarvie, Megan J., 2007. "Academic science and the birth of industrial research laboratories in the U.S. pharmaceutical industry," Journal of Economic Behavior & Organization, Elsevier, vol. 63(4), pages 756-776, August.
    5. Ashish Arora & Sharon Belenzon & Andrea Patacconi & Jungkyu Suh, 2020. "The Changing Structure of American Innovation: Some Cautionary Remarks for Economic Growth," Innovation Policy and the Economy, University of Chicago Press, vol. 20(1), pages 39-93.
    6. Scott A. Shane & Karl T. Ulrich, 2004. "50th Anniversary Article: Technological Innovation, Product Development, and Entrepreneurship in Management Science," Management Science, INFORMS, vol. 50(2), pages 133-144, February.
    7. Smirnova, Michelle Hannah, 2012. "A will to youth: The woman’s anti-aging elixir," Social Science & Medicine, Elsevier, vol. 75(7), pages 1236-1243.
    8. Jackie Krafft & Francesco Quatraro & Pier Saviotti, 2014. "Knowledge characteristics and the dynamics of technological alliances in pharmaceuticals: empirical evidence from Europe, US and Japan," Journal of Evolutionary Economics, Springer, vol. 24(3), pages 587-622, July.
    9. A. Arrighetti & R. Brancati & A. Lasagni & A. Maresca, 2015. "Firms’ heterogeneity and performance in manufacturing during the great recession," Economics Department Working Papers 2015-EP03, Department of Economics, Parma University (Italy).
    10. Lee, Jeho & Park, Seung Ho & Ryu, Young & Baik, Yoon-Suk, 2010. "A hidden cost of strategic alliances under Schumpeterian dynamics," Research Policy, Elsevier, vol. 39(2), pages 229-238, March.
    11. Douglas H. Frank, 2014. "Governance Institutions and Adaptation Costs: Evidence from the Fall of the Berlin Wall," Management Science, INFORMS, vol. 60(1), pages 166-187, January.
    12. Leiponen, Aija & Drejer, Ina, 2007. "What exactly are technological regimes?: Intra-industry heterogeneity in the organization of innovation activities," Research Policy, Elsevier, vol. 36(8), pages 1221-1238, October.

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