Such small biotechnology firms continue to generate much of the most promising research in biotechnology. One recent study concluded that small biotechnology firms make unusual contributions to innovation, as measured in patent applications (both product and process). Although they no longer have the overwhelming innovative advantage vis _ vis established U.S. or Japanese companies seen in the early 1980s, the patents they spawn are still cited disproportionately.19 R&D is the lifeblood of biotechnology firms for many U.S. firms whose R&D expenditures well exceed revenues (see Table 1).

In contrast to the small U.S. biotechnology firms that have consistently had a comparative advantage in biotechnology R&D, most large U.S. companies did not have their own in-house biotechnology R&D programs in the early 1980s.20 Instead, they relied on R&D contracted with the small biotechnology firms. Japanese and European companies also lacked in-house biotechnology R&D programs in the early 1980s. Today, some of the large pharmaceutical and other companies are beginning to pursue biotechnology-related R&D_as a complement, rather than a substitute, to their main areas of business activity.

The special strengths of the large companies continue to be in traditional drug discovery, manufacturing, marketing and distribution of products, and their financial strength. In addition, large pharmaceutical firms have much experience with the process of regulatory approval, which can be time consuming and costly in the United States and elsewhere. Large pharmaceutical companies invest considerable resources in drug discovery and development as a prerequisite for manufacturing and marketing.

The large U.S. firms such as Monsanto, Eli Lilly, Schering-Plough, and Merck, which were the first to begin their own in-house biotechnology R&D programs in the early 1980s, also established technology links with the small biotechnology firms. The major motivation for these linkages was to access technology developed in the small biotechnology firms in order to commercialize it and to bring the technology in-house over time.21

Universities and other research institutions continue to be critical actors in biotechnology research. As noted earlier, basic research in biochemistry and molecular biology at universities can lead directly to commercial applications. For example, Centocor pays royalties to universities for 15 products it has developed. Moreover, individual researchers trained at universi-

19  

Joshua Lerner, "The Flow of Intellectual Property Between the U.S. and Japanese Biotechnology Industries," Harvard Business School Working Paper, 1991. Lerner's paper summarizes his detailed analysis of patent citations as a measurement of technological flows. His conclusions confirm the predominant flow of technology from the United States to Japan.

20  

Office of Technology Assessment, Commercial Biotechnology (Washington, D.C.: U.S. Government Printing Office, 1984).

21  

Mark D. Dibner, "Corporate Strategies for Involvement in Biotechnology," Bifutur (Paris), July-August, 1987, pp. 47–48.



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