MEASURING COMPETENCE? EXPLORING FIRM EFFECTS IN PHARMACEUTICAL RESEARCH Rebecca Henderson Iain Cockbum Strategic management Journal(1994) ---Presented by Qing YANG & Pei-Lin YOU ---Presented by Qing YANG & Pei-Lin YOU

MOTIVATION  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 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 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 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 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 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[y it ]= it =exp(x it ß+ε it ) 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 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 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 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!