Continuous innovation is one of the pharmaceutical industry’s most defining characteristics. New medications can be crucial for maintaining the quality of human life, and may even affect its duration. The sales potential is staggering: the global pharmaceutical market is expected to reach $1.1 trillion by 2015. The pressure to succeed is tremendous. Yet, pharmaceutical innovation is hardly an orderly, predictable process. It follows a technology-push model dependent on a meandering path of scientific breakthroughs with uneven timing and hard to foresee outcomes. Technological competency, decades of rigorous research, and profound understanding of unmet customer needs, while necessary, may prove insufficient for market success as the critical decision for commercialization remains outside the firm. Drug innovation as a business process requires savvy strategic, organizational, and managerial decisions. It is already enjoying intensive research coverage, giving rise to abundant but relatively dispersed knowledge of the mechanisms driving drug discovery and development. In this chapter, we present a comprehensive overview of the process of drug innovation from a business and academic perspective. We discuss the evolving organizational forms and models for collaboration, summarize significant empirical regularities, and highlight differences in market positions related to firms’ strategic orientation, innovation emphasis, attitudes to risk, and specialized resources. As a guide to future research, critical drivers and modes for drug innovation are systematized in a unifying framework of characteristics and process decisions, and multiple areas in need of further scrutiny, analysis, and optimization are suggested. Because of its rich potential and high significance, research on drug innovation seems poised to gain increasing momentum in the years to come.
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