This research extends prior work by taking a broader view of innovation in a rapidly changing and increasingly important industry: biotechnology. Scholars and practitioners assume innovation is necessary for survival as firms strive to keep pace in today's rapidly changing business climate. Although anecdotal evidence exists, current research fails to systematically answer a crucial question regarding product innovation: Should firms develop novel products or build on existing products to increase the likelihood of success at each stage of innovation (i.e., product invention, product development, product success)? To answer this question I examine data on U.S. publicly-traded biotechnology firms and their products from 1985-2005. Data collection efforts include coding company reports on product development and strategic alliances as well as coding data from patents filed with the U.S. Patent and Trademark Office. Data from patent citations allow me to evaluate the extent to which a product is central--within a network of products--relative to the firm's, alliance partner's or competitor's existing products. Analysis consists of evaluating firm, product, and alliance characteristics that are associated with success across the stages of innovation.
This research provides several contributions to the understanding of biotechnology and technological innovation. First, understanding the factors that improve innovation in the biotechnology industry is critical for government and industry concerns regarding increasing costs of drugs and healthcare and for servicing the needs of an increasingly aging population in the U.S. Findings from this research should provide additional insight into factors that increase efficiency and reduce costs in biotechnology product development. Second, results from this study will yield a better understanding of the role of technology in sustaining successful innovation beyond typical alliance and resource-based explanations. Third, this study will provide a theoretical contribution to the literature on innovation more generally by conceptualizing innovation relative to both the firm and the environment across the stages of innovation.
