When Innovation Is Not Enough Managerial Challenges of Technology Change in Pharmaceutical R&D

University dissertation from Stockholm : KTH Royal Institute of Technology

Abstract: Innovation is not always enough. In the beginning of the 2000s established pharmaceutical firms had developed several drugs, yet these new products were far too few. Patents of many blockbuster drugs were to soon expire and substantial profit would then be lost. A potential solution emerged: implementing new biomarker technologies in drug development.Biomarkers are required for knowledge creation about the drug effect on underlying causes of a disease. The problem is this: although academia, industry, and policy makers have deemed biomarkers as necessary for successful drug development, pharmaceutical firms have not used them in actual drug development projects.  Since the 1990s, established pharmaceutical firms have invested financially and restructured organizationally in order to implement biomarkers. Still, cases show that more than 50% of project termination in Clinical Phase 2 (the bottle neck of drug development) can be attributed to the lack of implementing biomarkers.  Challenges of established firms transforming in the face of technology change is a commonly studied phenomenon within innovation management literature. Several explanations have attempted to determine why established firms fail in following technology change. However, most of this literature has been based upon an empirical context where technology change is conceptualized as an innovation of the dominant product design in the industry. Consequently, the challenge is to develop or adapt a discontinuous product innovation.Conversely, implementing biomarkers is a case of technology change that impacts R&D. Since drugs lose their value when the patent protection expires, the established pharmaceutical firms need to continuously develop new block buster drugs – not just one product. More research is needed to fill this gap in the literature in order to develop an understanding of the established firm challenge in implementing biomarkers.This thesis builds upon a longitudinal case study of AstraZeneca. Using multiple data sources, the findings show that the dominant architecture of the drug development process during the 2000s impeded the implementation of biomarkers. AstraZeneca required an “architectural process innovation” in order to complete this implementation. The company’s process-based management structures distorted it from recognizing the need for process change.This thesis has three contributions: First, it describes the process change and the firm’s managerial challenges associated with biomarker implementation; Second, it contributes to the literature on the established firm challenge by developing an understanding of the phenomenon of architectural process innovation; Third, it develops a process-based framework for studying technology change that affects R&D.