MEASURING COMPETENCE? MEASURING COMPETENCE? EXPLORING FIRM EFFECTS IN PHARMACEUTICAL RESEARCHEXPLORING FIRM EFFECTS IN PHARMACEUTICAL RESEARCH

Rebecca HendersonRebecca Henderson

Iain CockbumIain Cockbum

Strategic management Journal(1994)Strategic management Journal(1994)

---Presented by Qing YANG & Pei-Lin YOU---Presented by Qing YANG & Pei-Lin YOU

MOTIVATIONMOTIVATION

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

THIS PAPER’S FOCUSTHIS 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

EXPLORING PROCEDURESEXPLORING 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’

COMPONENT COMPETENCECOMPONENT 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?

COMPONENT COMPETENCECOMPONENT 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

COMPONENT COMPETENCECOMPONENT 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

ARCHITECTURE COMPETENCEARCHITECTURE 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

ARCHITECTURAL COMPETENCEARCHITECTURAL 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

ARCHITECTURAL COMPETENCEARCHITECTURAL 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?

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

非常感谢大家！

Thanks for your attention!