Corporate governance and firm strategy in the pharmaceutical industry.

Corporate Governance and Firm Strategy
in the Pharmaceutical Industry

Marktprozeß und Unter-

Research Area
Market Processes and
Corporate Development

Steven Casper, Catherine Matraves, Corporate Governance and
Firm Strategy in the Pharmaceutical Industry,
Discussion Paper
FS IV 97 - 20, Wissenschaftszentrum Berlin, 1997.
Wissenschaftszentrum Berlin für Sozialforschung gGmbH,Reichpietschufer 50, 10785 Berlin, Tel. (030) 2 54 91 - 0 Corporate Governance and Firm Strategy in the Pharmaceutical Industry
Using the case of the pharmaceutical industry, this paper assesses how the leadingGerman and UK firms are adapting to changes in their competitive environment, at boththe national and international level. We attempt to link how firms create governancestructures (management decision-making, the organisation of the R&D process, etc.),and the national system of innovation, impact the innovation strategies adopted in leadingGerman and UK firms. Our results show that first, the firm competencies created inorder to compete globally may still originate within national economies, in part becausethe generation of R&D remains relatively national. Second, towards the end of the1970s, the scientific basis in the pharmaceutical industry began to change rapidly. Theevidence presented shows that UK firms rapidly developed new competencies inbiotechnology and other research areas in response to the structural changes. However,German firms tended, until very recently, to maintain and in some cases strengthencompetencies in traditional research methods based on organic chemistry.
Corporate Governance und Unternehmensstrategie in der pharmazeutischen

Am Beispiel der pharmazeutischen Industrie wird in diesem Beitrag aufgezeigt, wie füh-rende deutsche und britische Firmen sich an Änderungen in ihrer Unternehmensumweltanpassen, sowohl der nationalen wie auch der internationalen Umwelt. Es wird gezeigt,wie die Unternehmen Governance-Strukturen (Managemententscheidungen, die Organi-sation von FuE-Prozessen etc.) schaffen und wie nationale Innovationssysteme die Inno-vationsstrategien beeinflussen, die von führenden deutschen und britischen Firmen ver-folgt werden. Erstens gelangt die Studie zu dem Ergebnis, daß die Kompetenz derUnternehmen so ausgerichtet wurde, daß sie für den globalen Wettbewerb fit sind, aberihre Wurzeln dennoch innerhalb der nationalen Volkswirtschaften behalten, teilweisedeshalb, weil FuE verhältnismäßig national fundiert ist. Zweitens begann zum Ende dersiebziger Jahre eine dramatische Änderung in der wissenschaftlichen Basis der pharma-zeutischen Industrie. Diese Evidenz zeigt, daß britische Firmen rasch neue Kompetenz inBiotechnologie und anderen Forschungsbereichen entwickelten, um auf die Änderungenzu reagieren. Deutsche Unternehmen tendierten jedoch noch bis vor kurzem dazu, ihrebisherige Kompetenz beizubehalten und in manchen Fällen in traditionellen Forschungs-bereichen, basierend auf organischer Chemie, sogar zu verstärken.
In recent years, the question of how firms are organised and the resulting impact onproduct market strategies has become increasingly important. Commercial activity is notspread evenly across nations (Porter, 1990). Firms in the US and UK, for example, havetended to excel in high technology industries where the pace of innovation is very rapidand technological paradigms are shifting (Soskice, 1994). Examples includebiotechnology, software, and network communications. German companies, by contrast,seem unable to successfully compete in these high-technology fields, but are verysuccessful in established science-based industries such as traditional pharmaceuticals, aswell as a number of high-quality manufacturing sectors such as machine-tools (Streeck,1992; Katzenstein, 1989). An emerging literature explains cross-national variation infirm characteristics and their product market strategies as the result of differences innational institutional frameworks (Aoki, 1990; Hollingsworth, 1997; Soskice, 1994,forthcoming).
This paper considers these issues within the context of the pharmaceutical industry,which is an interesting case in that it is one of the few high technology industries whereEuropean firms are competitive in the global market place (Sharp and Patel, 1996;Panorama, 1996).1 The main objective of the paper is to assess how the leading Germanand UK pharmaceutical firms are adapting to changes in their competitive environment,at both the national and international level, with particular emphasis on the links betweencorporate governance institutions, national systems of innovation and product marketcompetition. During the 1980s, UK pharmaceutical firms substantially outperformedtheir German competitors in adjusting to changing industry dynamics. The paper linksthe relative success of the UK pharmaceutical industry to differences in nationalinstitutional frameworks in the two countries.
To provide a brief introduction to the competitive process in pharmaceuticals, firstobserve that this industry is characterised by dynamic competition. New products (andalso processes) are continuously being introduced. Unlike basic chemicals, say, whereinnovation is rather more incremental and new products displace the old uponintroduction, the pharmaceutical industry is better characterised as an example of aradically innovative industry. The firm’s main goal is to introduce a new chemical entity(NCE) in an existing or new therapeutic market. Second, and importantly, competitionis truly global. The results from R&D are easily transferable across national borders,with perhaps some local modification necessary to comply with thestandards/regulations. In other words, the results from R&D can be exploited anywherein the world, although note that the generation of R&D remains far less international(Patel, 1995). However, the competencies which firms must create in order to compete 1 Sectoral comparisons of innovative performance between Europe, Japan and the US show thestrength of pharmaceuticals, where Europe’s capabilities were developed in the late nineteenth century.
globally, and the rules by which markets are organised, may originate within nationaleconomies. In part because the generation of R&D currently remains relatively national,although this is changing, we argue that leading firms’ competencies will still beinfluenced by national institutional frameworks.
Towards the end of the 1970s, the scientific basis in the pharmaceutical industry began tochange rapidly. The evidence presented in this paper shows that UK firms rapidlydeveloped new competencies in biotechnology and other research areas in response tothe structural changes. However, German firms tended rather more, until very recently,to maintain and in some cases strengthen competencies in traditional research methodsbased on organic chemistry. We attempt to link how firms create governance structures(management decision-making, the organisation of the R&D process, etc.), and thenational system of innovation, impact the innovation strategies adopted in leadingGerman and UK pharmaceutical firms.
In section two, we first summarise the national market characteristics of thepharmaceutical industry from the early 1980s to the present day. Second, section twoexamines how exogenous structural changes have affected the competitive environmentbeginning during the late 1970s. We consider the substantial rise in R&D expenditure,the increasing importance of the marketing and distribution networks, the increasing useof external sources of knowledge (research joint ventures, mergers, and acquisitions) andtheir resulting impact on the threshold size of the firm. Section three first analyses theimportance of the typical patterns of firm organisation in the UK and Germany andsecondly, shows how national institutional frameworks play a role in aiding firms to buildspecific competencies. Section four, using interview evidence for the most part, appliesthis framework to show the implications for and the actual differences in strategiesacross German and UK firms. Finally, Section five summarises and concludes.
Market Structure and Competitive Dynamics
This section first summarises the aggregate market characteristics for the five largestpharmaceutical producing nations, as shown in Table 1 below. Using several summarymeasures, we can construct a picture of a given nation’s competitive position at thebeginning of the 1990s. We particularly emphasise the trends in the UK and Germanrespective competitive positions. We look at R&D expenditure, patent trends, NCEs,number of products in the Top 50, and firm market share in the US. We include thenumber of products in the Top 50 to account for the fact that although some NCEsintroduced are genuinely original, others may be marginal improvements only whichcould then make the NCE figures somewhat misleading. We include firm market share inthe US as a crude measure of competitiveness, because the US market is the most openand competitive market in the world.
To first give the overall summary, the data show that the US is the largest domesticmarket in the world (although total EU market size was $47.7 billion in 1987 and $88.8billion in 1993). Mark-ups were highest, on average, in Japan and lowest in the UK;note that Japan was, until recently, an extremely regulated protected domestic market.
Table 1 also shows that there exist variations in health expenditure between countries.
Health expenditure as a percentage of GDP is highest in the US, and the gap is wideningover time between the US and other nations. The US also has by far the lowestproportion of health expenditure funded by public sources. In 1989, the EU average forfunding by public sources was 66%, so France lies below the average, with bothGermany and the UK above the average.
Table 1 shows that the US pharmaceutical industry is strongest. The US has the highestR&D expenditure, the largest introduction of NCEs, and also, the products from its firmsdominate the Top 50. Although Japan substantially increased its proportion of NCEs inthe 1981-1990 period, evidence shows that if the number of breakthrough NCEs isconsidered, then between 1970-1983, US firms developed 42% whereas Japanese firmsonly developed 4% (Ballance et al, 1992; Thomas, 1996).2 The trends in patentingactivities show that among the EU member states, there has been a slight decline overtime in patenting activities in the US, with a slight rise for Japan. Thus, Japanesepharmaceutical firms, unlike in electronics, for example, are not competitive in the USmarket place.
Consider now the summary of the UK and German ‘national strength’ aggregatemeasures. The success story in the EU has been the rise of the UK in the 1980s. Itsleading firm, Glaxo, for example, rose from 17th in the world in terms of sales in 1983,to 1st in the world in 1995. We have observed a relative increase in R&D expenditure inthe UK, and furthermore, its companies are extremely good at developing NCEs that arecommercially successful. During the 1981-1990 period, only 28 new drugs weredeveloped, but a relatively high percentage of these turned into blockbusters. Germany,on the other hand, has a much weaker position. It developed far more drugs (67 NCEsbetween 1981 and 1990), spends approximately the same amount on R&D, but has avery low number of blockbusters to account for this (only 5 in 1990).3 As a finalmeasure of international competitiveness. Germany’s share of the US market is only 2 Looking at R&D expenditures note that in 1983, the lowest R&D to sales ratio was in Japan whichwas a protected domestic market, although between 1983 and 1992, expenditure did substantially rise.
3 In 1993 (Matraves, 1996), Glaxo (UK) had the highest R&D expenditure worldwide at $1.3 billion,was operating in several therapeutic areas, with 6 Top 50 products, including the number one, Zantac(gastro-intestinal). SmithKline Beecham (SKB, UK) spent $743.5 million on R&D, with 4 Top 50products, including Tagamet (gastro-intestinal). Note that in Table 1, SKB’s 3 best-selling drugs arecredited to both the US and the UK as the company is of joint ownership. Hoechst (Ger) spent $967million on R&D but had no products in the Top 50, albeit a relatively strong position in cardiovasculardrugs and anti-infectives. Bayer (Ger) spent $723.5 million on R&D and had two products in the Top50, including Cipro (anti-infectives). Note that R&D works with a lag, so it may be that we will seeGerman firms becoming more research productive in a few years.
Table 1: International Comparison of Market Characteristics
Source: unless explicitly stated, the source is Sharp and Patel, 1996. R&D intensity is
measured as a percentage of gross output; patent trends are measured as the distribution
of US patents granted to innovators from different countries. Mark-ups (Martins,
Scarpetta and Pilat, 1996): estimated using Roeger’s method. Market size (Matraves,
1997): ‘value of production’ taken from the OECD ‘Industrial Structure Statistics’,
accounting for ethical pharmaceuticals only. The dollar conversion was made using the
nominal average exchange rate (OECD Outlook, June 1994). Global market size was
measured at $135.5 billion (1987) and $239.5 billion (1993).
Having provided a brief summary of aggregate market characteristics in thepharmaceutical industry, this section now goes on to examine exogenous structuralchanges observed over the past two decades. Beginning in the late 1970s, competitiveindustry dynamics have become more complex. This was due to radical changes in thenature of the innovation process and the introduction of new marketing and distribution techniques. We will later link the differences in the performance of UK and Germanpharmaceutical firms, as highlighted above, to their ability to react to these changes inthe competitive environment.
(i) the nature of the technological process: over the last twenty years, the development
of biotechnology has fundamentally changed how drugs are discovered. The traditional
methodology, prevalent in the 1950s and 1960s when knowledge about the properties of
the compounds that could be used to synthesise new drugs was still lacking, screened
thousands of chemical compounds for efficacy against a given disease (Schwartzman,
1976). In the 1970s, basic biomedical knowledge increased; the traditional methodology
has been replaced by ‘rational drug design’, i.e., the development of more precise models
of how particular diseases function, and the design of molecules designed to target
particular cells or cause particular biological interactions within the body (see Werth,
1995; Powell, 1996: 204). Biotechnology is beginning to displace traditional ‘chemical’
When such a new research methodology is adopted, it may be the case thatorganisational rigidity and inertia hinder incumbents’ ability to take advantage of newopportunities. However, although the discovery process is changing, the assets neededfor development and commercialisation are not, and these assets continue to be ownedby the largest firms. As in any industry, the pharmaceutical industry comprises a value-chain of clusters of organisational, capital, and human resource competencies in areassuch as research, development, production, marketing, distribution, etc. Inpharmaceuticals, some processes in this value chain, such as manufacturing, are genericactivities with low value-added. As research is one of the highly specialised and hencevalue-added processes, the fact that most biotechnological research is taking place withinsmall start-up firms rather than large firms is an important change (see Powell, 1996).5However, the vast majority of start-ups are crucially dependent on large pharmaceuticalfirms. This is leading to interesting networks of agreements being observed, where thebiotech firms supply the ideas, etc., and the larger firms supply the complementaryspecialised assets (to use Teece’s (1986) terminology) such as development, financing,obtaining regulatory approval, and finally marketing, that allow them to appropriate mostof the gains from innovation.
To develop this further, the cost of developing a single new drug is currently about $350 4 Biotechnology is based primarily on recombinant DNA and cell fusion techniques. In thepharmaceutical industry, biotechnology is used in 3 different ways: i) to produce drugs and vaccinesusing rDNA technology; ii) to make intelligent screens for new compounds; and iii) to apply techniquesfor rational drug design by understanding molecular structure.
5 It must be pointed out, of course, that although new start-ups may be undertaking proportionatelymore R&D, the leading firms still spend by far the largest amount, in absolute terms, on R&D. Theleading Top 20 firms in the world control approximately 50% of pharmaceutical sales and 95% of R&Dexpenditure (Grabowski and Vernon, 1994a).
million (Pisano and Wheelwright, 1995; Di Masi et al., 1991); only a small proportion isspent in basic research (current estimates are approximately 10%, PhRMA 1997). Oncecompounds are discovered/designed, most development and virtually all marketing anddistribution is undertaken by large pharmaceutical firms. Basic research results areusually not known for several years, so securing financing is a crucial problem for moststart-ups. As a result, many biotech firms license all or part of their results to the largepharmaceutical firm in return for working capital.6 The existence of hundreds ofspecialised research firms increases the flexibility of large firms, and as long as they canappropriate most of the commercial gains from bio-medical research, then establishedfirms have important reasons to support and engage independent third party researchnetworks.
Also, by nurturing third party research, established firms may better diversify risk. It isestimated that only 1 compound from an initial 5,000 will be successfully developed(PhRMA, 1997). R&D costs have also substantially increased due to tougher regulatoryrequirements in clinical trials, which accounts for approximately 70% of totaldevelopment costs (Gambardella, 1995). If in-house research in one therapeutic area isunsuccessful, purchasing compounds developed by third parties can help to fill gaps inthe development pipeline. In the world of rational drug design, research in complexdisease areas usually takes place along a number of distinct research trajectories.7 Forexample, Penan (1996) identifies fifteen distinct research programmes to fightAlzheimer’s disease, each of which is supported by a different constellation of universitydepartments, large pharmaceutical firms, and in some cases, biotech firms.8 Under theseconditions, in which no one firm can monopolise a therapeutic field, the ability to scanresearch becomes crucial. Although it is still important to maintain in-house scientificand technological capabilities for monitoring and using external knowledge, developinglicensing arrangements and research collaborations with biotech firms helps diversify thefirm’s ‘bets’ across a number of research programmes.9 Overall, these new research opportunities imply that firms may have an incentive tochange the structure of their internal R&D activities, to broaden their activities across a 6 Doz (1992) argues that the more invisible and intangible the assets of a particular firm are, the morebeneficial the partnership will be. However, it may be that the more the observed skills are systemembedded, collective, culturally bound, etc., the less easily they transfer.
7 Note that rational drug design also allows firms to redesign established drugs for use against otherdiseases. For example, Glaxo (UK) recently transformed one of its established AIDS drugs into ahepatitis cure, while Eli Lilly (US) has redesigned its anti-depressant Prozac as a weight-loss drug.
Furthermore, rational drug design also simplifies the task of developing ‘me-too’ drugs that arechemically equivalent, but do not violate patents held by other firms.
8 Furthermore, the therapies for some of the more complicated diseases, such as AIDS and perhapsAlzheimer’s, often consist of ‘cocktails’ of two or more compounds developed through separate researchprogrammes.
9 Interestingly, only 5% of Merck’s R&D is carried out externally, whereas the figure is now muchhigher for other leading firms (up to 20%): Financial Times (24/5/97), Economist, 1997, 60.
larger number of therapeutic areas. Each therapeutic area becomes a platform fromwhich the firm can monitor the field, purchasing promising compounds from thirdparties, developing collaborative research projects with universities or research firms, orstarting in-house research projects. In addition to increasing the ability to scan the field,maintaining competencies in a number of therapeutic areas allows firms to betterredesign compounds for use against new diseases, develop ‘niche’ markets, and ‘me-too’drugs.10 However, given the massive increase in R&D costs, it may be that only the largestmultinational firms will be able to cover a wide range of therapeutic areas.11 Also, giventhe existence of knowledge spillovers (through journal publications, etc.), it may beextremely difficult to maintain a consistently successful research competency in onetherapeutic area.12 Although knowledge is a public good, it is not a free public good(Pavitt, 1991; Gambardella, 1995), and internal scientific capabilities will still benecessary for knowledge exploitation (Cockburn and Henderson, 1996). Substitutedrugs are constantly being discovered; PhRMA, for example, estimates that the‘exclusivity period’ before a substitute drug enters the market has decreased from 6years in 1977 (Tagamet and Zantac) to 1 year in 1992 (Recombinate and Kogenate).
(ii) marketing and distribution networks: over recent years, large pharmaceutical
firms have spent as much money on marketing and distribution as they have on
development.13 Until recently, marketing was dominated by the labour intensive practice
of sending thousands of ‘detailers’ to visit individual doctors, as well as some advertising
in medical journals. However, recent pressure to increase the returns on individual
drugs, coupled with important developments in the organisation of the US
pharmaceutical market, have prompted leading firms to adopt new distribution and
marketing strategies. Redeveloping prescription drugs into ‘over the counter’ (OTC)
10 Henderson (1994) argues that ‘random drug design’, via the screening of thousands of compoundsrequired relatively little communication of knowledge, either inter- or intra-firm. However, thechanging methodology of drug discovery means that modern scientists must be skilled in a wide range ofdisciplines many of which are advancing very quickly. This has greatly increased the need for theexchange of knowledge, both inter- and intra-firm. Also, the IT revolution has meant that drugs can bescreened far more quickly.
11 Henderson and Cockburn (1996) assert that firms typically invest in approximately 10-15 distinctresearch programmes, where each programme is targeted towards a particular disease area.
Investigating the relationship between firm size and research productivity for 10 leading firms, theirresults show that larger firms are more productive, due mainly to economies of scope (the ability tosustain an adequately diverse portfolio of research projects and to capture and use internal and externalknowledge spillovers).
12 Henderson and Cockburn (1994) argue that ‘local competencies’ (abilities necessary for everydayproblem solving) may give long-lasting advantages but firms also need ‘architectural competence’ (theability to develop new competencies). Using data on cardiovascular drugs, they find that the better isoutside-firm communication, and the better are within-firm information flows across therapeutic classes,the more research productive is the firm. The results are consistent with their hypotheses.
13 McGahan (1994) asserts the industry as a whole spent one billion dollars more in 1991 on marketingand distribution than on research and development.
versions is perhaps the simplest way to extend the life of a compound nearing the end ofits patent life. This tactic requires direct to consumer advertising through thecommercial media, as well as the development of distribution channels to retail outlets.
These marketing and distribution competencies differ dramatically from the moretraditional ‘detailing’ activities. Pharmaceutical firms that choose the OTC route havetwo options. First, they could establish costly relationships with advertising agencies anddevelop new distribution channels; or second, form marketing joint ventures (JVs) withfirms who have already developed a competency in the areas required.14 The most important changes that have occurred in the US, however, have developed as aresult of the reorganisation of links between doctors, distributors (pharmacies), andinsurers. During the 1980s, health care and insurance functions began to merge intoHMOs and other managed care organisations, encouraged by various reforms in the UShealth care system.15 This created networks of concentrated buyers. Towards the end ofthe 1980s, a similar fusion of pharmacy, marketing, and distribution operations began totake place within so-called ‘pharmaceutical benefits management’ (PBM) firms. PBMsserve these concentrated buyer networks, partly by providing drug utilisation reviewsand other information such as drug usage rates that pharmaceutical firms can feed backinto their development and marketing activities, but more importantly, by using theconcentrated purchasing power to negotiate strong price discounts. This is done throughmanaging the ‘formulary’ (the list of drugs that each doctor within a certain health careorganisation can prescribe). In recent years, leading US pharmaceutical firms haveacquired several of the largest PBMs (see Table 2), showing evidence of forwardintegration into health care markets.16 Such forward integration complements an expansion of research across severaltherapeutic areas. While firm profits are still driven to a relatively large extent by thecontrol of a few ‘blockbusters’, the new distribution and marketing capacities ensure thatthe life-cycle of each compound can be maximised, especially as drugs nearing patent endare transformed into OTC versions. Having some guaranteed market access throughcontrolling one or more PBMs allows leading firms to minimise the risk of not beingfirst, i.e., if a firm loses a ‘race’ to develop a particular treatment, it can usually producea ‘me-too’ drug within a few years, and assure a fixed volume of sales through the PBM.
14 Recent examples of the latter strategy include the Glaxo alliance with Warner-Lambert, and theMerck alliance with Johnson & Johnson, to develop and market OTC versions.
15 Over 100 PBMs emerged in the US during the 1980s (McGahan, 1994); by 1996, 53 million peoplewere enrolled in HMOs in the US, up from 9 million in 1980. Generic substitution is now used by 85%of HMOs, and currently accounts for 40% of the volume of prescription pharmaceuticals.
16 The control of formularies does not mean that pharmaceutical firms can charge higher prices fortheir drugs, since each HMO can choose between a number of PBMs on the basis of the price and theavailability of drugs. Nevertheless, guaranteed market access to a large network of buyers allowspharmaceutical firms to maximise the value of their drug portfolio; especially with respect to genericsand ‘me-too’ equivalents of branded drugs where large sales volume is crucial.
According to a recent industry analysis, some 90% of patented drugs have directcompetitors, and there exist three or more direct competitors in 15 of the top 20therapeutic areas (Powell, 1996: 204).
Table 2: Mergers and Acquisitions
SmithKline Beckman (US) and Beecham (UK) merged. Bristol-Myers (US) andSquibb (US) merged. Dow (Merrell) (US) and Marion (US) merged.
Rhone-Poulenc (Fra) and Rorer (US) merged. Roche (US) bought 60% ofGenentech (US) (biotech firm) for $2.1 billion.
Merck (US) paid $5.9 billion for Medco (US distributor). Synergen (US) andAmgen (US) merged ($2.6 billion).
Ciba Geigy (Ch) paid $2.1 billion for 50% of Chiron (US biotech firm).
American Home Products (US) paid $9.8 billion for American Cyanamid (US).
Roche (Ch) paid $5.1 billion for Syntex. SmithKline Beecham (UK) paid $2.9billion for Sterling Health (US) and resold part of it to Bayer (Ger) for $1 billion;also bought DPS (PBM/distributor) for $2.3 bn. Eli Lilly (US) paid $4 billion forPCS (US distributor).
Glaxo (UK) paid $14 billion for Wellcome (UK). Hoechst (Ger) paid $7.1 billionfor Marion Merrell Dow (US). Pharmacia (Swed) and Upjohn (US) merged.
Rhone-Poulenc (Fr) acquired Fisons (UK) for $1.7 billion and BASF (Ger)acquired Boots (UK) for $1.3 billion.
Ciba-Geigy (Ch) and Sandoz (Ch) merged forming Novartis (with an estimatedmarket share of 4.5%).
Roche (Ch) acquired Boehringer-Mannheim (Ger).
Source: Matraves (1997)
This section has described the underlying changes in the competitive environment in theglobal pharmaceutical industry. Overall, minimal firm size is increasing due to theincreased costs of R&D, and the marketing and distribution networks necessary toexploit the new drug globally. An additional factor is that if the largest firms arebroadening their R&D activities, this may best be done in combination with forwardintegration into new marketing and distribution networks. Table 2 shows the extent ofthe recent merger activity in the pharmaceutical industry. Since the 1989 merger ofSmithKline with Beecham to the Ciba-Sandoz merger in 1996 forming Novartis, theindustry has been rapidly restructuring itself leading to a consolidation of firms at thetop. Table 2 shows that this restructuring has been dominated by global (inter-regional)activity. What is interesting here is that the European firm is the more proactive. Theleading firms which have been international in operation are now becoming international in ownership. We now consider the question of whether national models play a role inhow firms compete globally. Section 3 presents a framework for thinking about theseissues.
The importance of national models
National political economies are characterised by complexes of institutions in differentareas (e.g., industrial relations, capital markets, education and training) which firms drawon to support particular product market strategies. National institutions representresources or ‘tool kits’ firms can engage to create and manage the organisationalstructures needed to sustain particular competencies. In this section, we first examinethe typical patterns of firm organisation in the UK and Germany, proposing a generalargument about building organisational competencies. Second, we examine the role thatnational innovation systems play in influencing product market strategies. We will latersuggest the superior performance of UK firms can be linked to corporate governanceinstitutions that support rapid short-term adjustments to structural changes, and anenvironment created by the national system of innovation that supports radicalinnovation.
(i) corporate governance and large firm organisation patterns: firm structures form
the organisational context within which managers adjust their product market strategies
to compete (Bower, 1970). Organisational structures refer to decision-making
structures, career paths, employee remuneration and other financial incentives, and also,
inter-departmental links. To create successful product market strategies, the firm
management must create and sustain relationships with a number of different groups,
e.g., workers, technicians, scientists, banks, etc. We view each aspect of company
organisation as a strategic response to a bundle of technical and relational problems. The
rules chosen by top management to organise and monitor decision-making, manage
careers, reward performance, etc., influence both the type of organisational responses
that firms can adopt and the range of possible product market strategies (national and
Relationship between owners and top-management: many comparisons of corporategovernance patterns within the UK and Germany focus on differences in the ability offirms to obtain finance to make long-term investments (Charkham, 1995; Vitols, 1995a).
According to the argument, the preference for short-term returns held by capital-marketbased financial systems like those seen in the UK and US force firms to limit long-terminvestments. Similarly, because most shares within Germany’s ‘bank-centred’ financialsystem are directly held or controlled by large banks with no short-term liquidity option,firms have access to ‘patient capital’ that may be used to finance long-term investments.
The ability of UK pharmaceutical firms to make long-term investments is driven byinvestors using the current product portfolio and ‘future drug’ pipeline to judge both the likely short-term returns and long-term viability.
While we argue that differences in the composition of ownership is one of a number offactors that create substantially different patterns of company organisation across UKand German pharmaceutical firms, in both countries firms have been able to investmassive amounts of funds into R&D. In fact, Table 1 shows that UK firms not onlyinvested a higher percentage of R&D, but also substantially increased expenditurebetween 1983 and 1992. Although there is the risk that high R&D spending will notyield any blockbusters, it is clear that it is one of the best predictors of long-term success.
In the short-run, investors will quickly sell shares if the firm begins to cut R&Dexpenditure.
A key feature of the UK corporate governance system is that company law protects therights of dispersed shareholders by guaranteeing a market for corporate control. In theUK, most large firms have a single board of directors, consisting of several non-executive directors appointed to represent shareholders, as well as the chief executiveofficer (CEO) and several other executive directors (see Charkham, 1995).
Representatives of share-holders create contracts to align the incentives of top managerswith those of owners.17 Top managers of most large firms receive renewable short-termcontracts; non-executive directors will remove the top management team if performancelags. The CEO is given unilateral decision-making control, and strategic initiatives areusually formulated within committees of top managers, approved by the CEO, and thenquickly implemented throughout the hierarchy.
In Germany, company law promotes a ‘stake-holder’ system, in which various groups ofemployees in addition to owners are given a strong voice in firm management(Charkham, 1995; Lehrer, 1997). Company law creates a ‘two tier’ system consisting ofboth a supervisory board (the Aufsichtsrat) and an executive board (Vorstand). UnderGerman company law, seats on the supervisory board are equally divided between firmemployee representatives and owners representatives, with the tie-breaking vote held bythe supervisory board chairman, also an owners representative. In the German system,power is dispersed across various ‘stake-holders’ on the supervisory board, and mostdecisions are consensual. Thus, while members of the Vorstand can be removed if theirperformance is severely sub-standard, they rarely receive the unilateral decision-makingcontrol or high-powered remuneration incentives seen in UK firms. Finally, as majorownership stakes are usually far more concentrated within German firms, take-overs arerare. Thus, major shareholders are usually not interested in short-term capital gains andhave a preference for long-term earnings and stability. The broad academic consensusthat the German corporate governance system provides ‘patient capital’ is driven by 17 To align preferences, stock-options and share-ownership are included within remuneration packages,where remuneration is extremely high, and is largely based on short to medium-term performance of theshare price of the company stock.
basic differences in ownership. While the ‘stakeholder system’ of corporate governanceis strongly driven by company law, it is likely that banks and other concentratedstakeholders continue to support this system because it makes the patterns of companydecision-making predictable and rewards long-term planning and consensus decision-making.
Relationships between top-managers and employees:18 differences in the composition ofownership, combined with company and corporate governance laws and the structure oflabour markets have led to the creation of different patterns of firm organisation. Thefirm organisational patterns we highlight include the structure of decision-making,career-paths of managers and scientists, and remuneration policy. These differences areconditioned in part by the incentive structures arising from ownership differences, butalso by important differences in the structure of labour and company law in the twocountries.
UK labour markets are relatively deregulated and open. This makes implicit long-termcontracts with low-powered performance incentives less viable. There exists a marketfor managers and technical employees; courts will not uphold ‘competition clauses’ inemployment contracts that limit future employment; and poaching is widespread.
Furthermore, top management has more flexibility over internal labour market policy. Ifparticular corporate units are not meeting expected performance standards or, due to achange in strategy, are no longer needed, they may simply be cut.19 While in practice,many middle managers and researchers will work with one firm throughout their careers,there are usually no long-term employment guarantees. Although top managers have amandate to invest heavily in long-term R&D, they must contribute to measurable equityvalue creation, in terms of current profitability and/or share price, which also tends tomitigate against a strategy of offering long-term employment security. In the UKcorporate governance environment, high wages are part of a broader incentive structureto reward superior individual performance. Thus, in UK pharmaceutical firms, bothscientists and managers receive short-term contracts with no long-term employmentguarantee, considerable scope for individual initiative, and performance-related pay.20 By contrast, in Germany, while there exist no formal laws stipulating lifetimeemployment, German labour has used its power on supervisory boards as well as its 18 The generalisations on management-employee relations originate from interview evidence from UKand German pharmaceutical firms. Lehrer, 1997 forthcoming, undertakes an analysis of internal firmorgansiation in the UK and German civil airline market, and comes to similar conclusions.
19 In order to keep the return on capital high, top management will limit funding for research teamsthat do not produce viable candidate compounds in areas with broad commercial appeal (even if the vastmajority are not developed).
20 One of the large UK firms, for example, offered stock options to over 3,200 managers, includingvirtually all scientists and financial managers; similar practices were seen at other firms. Firms alsotypically linked a large percentage of pay (up to one third) to yearly performance reviews.
formal consultative rights under codetermination law over training, work-organisation,and hiring, to demand unlimited contracts. Top management has acceded to thesedemands for several reasons: i) to secure a cooperative labour force; ii) to lessen the riskof other firms poaching highly-skilled employees that the firm has trained; and iii)because German labour law forces firms to pay most of the unemployment insurance forlaid-off workers. Once the life-time employment norm was established, it spread tovirtually all mid-level managers and technical employees. Migration of managers andhighly-skilled technical employees across firms is limited, reinforced by the willingness ofGerman courts to uphold clauses in employment contracts that forbid an employee totake a job at a different firm with the same skill classification for one year after leavingthe original firm.
Given these constraints on personnel policy, top managers have created very differentorganisational structures than exist in UK firms. German employees receive salariesdefined by their hierarchical position, with pay increases following fixed trajectoriesbased on seniority and promotion. Bonuses are typically negotiated into standardcontracts and are not performance related. Most employees begin careers in technicalpositions and at later levels of their career enter into formal management positions.
Rapid promotion is rare. German firms rely on consensus decision-making acrosscommittees of several managers.
Table 3: Corporate governance and large firm organisational patterns
United Kingdom
This section has shown how differences in corporate governance institutions influencethe type of contracts owners form with top managers and, in turn, the type of contracttop managers create for employees within the firm. Table 3 summarises theserelationships between corporate governance institutions and firm organisation in the UKand Germany.
(ii) national systems of innovation
We argued in section two that changes in the nature of bio-medical science necessitates
that large pharmaceutical firms change their research processes. Instead of performing
most research in-house, it may be that pharmaceutical firms in today’s environment must
create competencies to scan multiple scientific fields and establish numerous alliances
with research firms and university scientists. While large pharmaceutical firms have,
during the 1990s, developed capacities to scan scientific research programs on a global
level, the national research environment in which they are embedded is crucial. Having
access to a local and vibrant bio-medical research community lowers the costs of
adjusting to changes in the discovery process. Experts on biotechnology have
documented a rapid movement of scientists between large pharmaceutical firms, start-up
research ventures, and university labs (Kornberg, 1995; Powell, 1996). These research
networks are much easier to establish within a firm’s local environment. Similarly, it may
be argued that large firms can more easily play a role in scanning and, through
supporting graduate training, shaping research at local universities and start-up research
firms than at foreign ones. If major breakthroughs affecting a firm’s research occur
within the local research environment, it reasons that they can then be monitored more
A large literature has in recent years examined institutions supporting innovationprocesses cross-nationally (see Nelson, 1993). Drawing in part from these studies, thissection examines differences in the ability of UK and German national innovation systemsto create the organisational competencies necessary to support radical advances in bio-sciences. In particular, we stress three factors which influence the ability of firms tosupport radically innovative research. These factors are the regulatory environment,venture capital, and the structure of labour markets and related career incentives. Weconsider how these factors operate first in Germany and then in the UK.
Within Germany a number of institutional and regulatory factors have combined with thelabour market policies developed by large firms to produce a hostile climate to thedevelopment of a vibrant small-firm biotechnology sector. First, for most of the lastdecade, German law-makers, in response to widespread social distrust of geneticresearch, developed and enforced a regulatory process covering all genetic research. Inreaction to a widespread perception that German is failing to develop high-technologyindustries in a number of areas, the approval process was simplified in 1993, and was abolished altogether in 1996. However, the sum result was that for over a decade, thislaw discouraged practically all biotechnology research in Germany (FrankfurterAllgemeine Zeitung, 1993; Handelsblatt, 1996a).
Second, Germany’s bank-centred financial system has not fostered the creation ofventure capital pools to support start-up research firms. Most biotech start-ups in theUS have been funded by the venture capital industry that emerged in the 1970s and1980s to support the US semiconductor and software industries (Kenney, 1986).
Venture capital is important not just as a means of funding, but also as a critical tool thatmanagers of start-ups use to create high-powered incentive structures for employees(Florida and Kenney, 1988).21 The venture capital system often creates an ideal incentivestructure for employees of biotech firms and provides a mechanism through which start-up capital is constantly recycled through the industry.
In recent years, German policy-makers and bankers have begun to understood theimportance of venture capital, and the government has organised and given seed-moneyto pools of money to support small firms in the biotechnology and other industries(Handelsblatt, 1996b, 1996c). The problem, however, is that equity markets aremassively undercapitalised in Germany compared to the US (or UK), and there existsnothing comparable to the NASDAQ exchange in the US. As a result, venture capitalistshave no way to quickly liquidate their investments, making it difficult to recycle venturecapital through subsequent rounds of investment. Additionally, offering employees ofstart-ups shares fails to produce a similar high-powered incentive structure, since there isno chance of an initial public offering for most small German firms.
Third, the career patterns developed by large German pharmaceutical firms, coupled with‘competition clauses’ within employment contracts, limits the creation of an activelabour market for scientists. It is difficult for scientists (and other managers) to movebetween different firms, since most hiring occurs at the entry level. Thus, leaving anestablished job to work in a start-up is much riskier than in the US and UK, where thereis a large market for managers and scientists of different levels of experience. InGermany, a failed venture with a start-up could lead to long-term unemployment. Thislack of a labour market of entrepreneurial scientists increases the difficulty of fostering avibrant community of small, start-up firms backed by venture-capital. Table 4summarises these arguments.
21 In most start-up schemes, all employees receive shares in the firm, along with venture capitalists.
Once a firm achieves initial commercial success (or in a biotech firm, develops a compound that can belicensed), venture capitalists liquidate their shares through an initial public offering. When successful,venture capitalists receive a multiple of their initial investments, which are usually invested intoadditional start-ups. Employees can now also sell their shares, often making a large profit.
Table 4: Influence of National System of Innovation on home market research
technology law createdcomplex approval process;law abolished in 1996 As shown in table 4 above, each of these factors previously emphasised is favourable tothe development of radical innovation in the discovery of new drugs in the UK. Theregulatory climate is permissive. No special legal regulations affecting genetic researchhave been created, and the results of research go through the normal clinical testing andreview process. High stock market capitalisation fosters the creation of venture capital.
Charitable trusts and private venture capital firms have all been active in fostering start-up companies in bio-sciences (reference). Several of the largest universities, includingCambridge and UCL, have started venture capital funds to create spin-off firms. Flexiblelabour markets reduce the risk of joining firms that face a high probability of failing.
Finally, UK universities quickly adopted the US norms of dividing patent royaltiesbetween researchers, departments, and the university. This has encouraged the creationof research communities linking the corporate and scientific communities. Table 4summarises these comparisons.
Implications for strategy
Recall that as a general point, Table 1 showed that first, there was a substantial rise inR&D expenditure in the UK between 1983 and 1992. Also, the absolute levels of R&Dexpenditure are approximately the same in the UK and Germany, and yet the UK isdiscovering substantially more blockbusters. Our evidence suggests that the reason thatGerman firms appear to be ‘less successful’ is a function of a superior response by UKfirms to the new competitive conditions in the global pharmaceutical market, asdescribed in section 2, both in terms of R&D and marketing/distribution. We will nowattempt to link this argument to the organisation of firms and the national system of innovation. There are three inter-linked factors: i) owner/ shareholder market pressures;ii) the ability to create flexible organisational structures; and iii) the impact of the nationalsystem of innovation.
i) owner/shareholder market pressures are becoming increasingly important in thepharmaceutical industry. In the UK, dispersed shareholders demand a certain rate ofreturn on their investment, or it is obvious that either they will sell their stock or notinvest in the firm. In Germany, the absence of a market for corporate control and theconcentration of company shares across a few large shareholders have muted pressuresfrom small share-holders for increased short-term returns. As the competitive pressureshave become more intense in the pharmaceutical industry, due to factors such asgovernment pressures on the costs of health care, globalisation and increasing R&Dcosts (see section 2), pharmaceutical firms have come under more pressure to developblockbusters.22 Research projects must be commercially viable.
In the UK, Zeneca was incorporated (demerger from ICI) in June 1992. Zeneca focusespurely on ‘life-sciences’, i.e., pharmaceuticals and agrochemicals. It was arguedthroughout the business press that this was market driven. The other leading firms in theUK, Glaxo and Wellcome (before the 1995 merger) are both purely pharmaceuticalmanufacturers. However, for both the leading German firms, Bayer and Hoechst, only acertain proportion of their sales are in pharmaceuticals. In 1993, the proportions were23% and 24% respectively. It has been very interesting to note that Hoechst has recentlybegun to transform itself into a life sciences group, selling many of its basic and specialitychemical subsidiaries in order to pay for the take-over of Marion Merrell Dow andexpand its activities in pharmaceuticals and agrochemicals (Handelsblatt, 1996). Itwould appear that the leading German firms are reacting later than the UK firms tochanges in competitive pressures. This evidence is consistent with the hypothesis thatthe ability of British shareholders to quickly „punish“ UK firms (through driving theshare price down of poorly performing firms and the unilateral control of the CEO) hasengendered better adaptation to changes in competitive pressures than observed inGermany.
The major UK firms are investing heavily in PBMs and other after-market firms in orderto obtain better information on market trends, and possibly influence doctor prescriptionchoices through ‘formulary management’. This is clearest with SKB, which as a half-USfirm, has been one of the prime movers in this area through its purchase of DPS, one ofthe largest PBMs. Also, Glaxo has formed a long-term marketing alliance with Warner-Lambert in order to expand its OTC opportunities, and has spun off a drug utilisationreview company (Health Point) in order to obtain doctor prescription information to aid 22 Grabowski and Vernon (1990, 1994b) show that i) the return to new drugs is highly skewed, a few‘blockbusters’ dominate the product ranges of the major firms; ii) only the top 30 drugs worldwide coveraverage R&D costs.
ii) UK firms have also created internal organisational structures to encourage a rapidresponse to changes in the market and scientific environment. Most importantly, the topmanagement of UK firms linked finance and research departments, which isaccomplished, in part, through linking promotion and bonus opportunities for financepersonnel directly to the commercial success of research. Financial personnel are directlyinvolved in research and development decision-making, by being included on all scientificcommittees charged with making research decisions. An additional practice is to train alllead scientists in management and financial analysis, primarily through sending them toexecutive courses within business schools. As a result, each of the UK firms we visitedhad developed extensive expertise in assessing the commercial viability of projects.
Factors such as potential market size and spin-off potential in OTC markets were cited ascentral in all research decisions. Partly as a result of the above, these firms were able tostop, if it were necessary, the vast majority of all research projects at a very early stageof development. One example, widely reported in the press, was the fact that, at the timeof the Glaxo-Wellcome merger, Welcome had as many research projects running asGlaxo, despite the fact that Wellcome was less than one third the size of Glaxo.23 Thishighlights the success by which shareholder concerns for profitability have beentransferred into organisational practices within Glaxo.
The interview evidence supports the notion that UK firms can move into and out of areasmuch more quickly than German firms. For example, upon deciding to enter into a newtherapeutic area, one of the UK pharmaceutical firms we visited had recently hired notjust a leading biochemist from a nearby university, but his entire research staff.
Department managers in both finance and research also confirmed that firms are unableto make long-term employment guarantees. Therefore, if research units have notachieved sufficient profitability in terms of viable compounds over a period of years, thenthey are dismantled, or researchers whose scientific skills have gone out of date arereleased.
German firms, by contrast, cannot move into new areas as quickly as UK firms. This isin part because of the lack of a market for established scientists within Germany. Newcompetencies must be slowly built up through hiring newly trained scientists and, whenpossible, reassigning internal scientists into new areas. Firms are also hesitant todedicate resources for what can only be long-term research into new areas in which theprobability of adequate returns is unknown. German firms can gradually reduce thework force through early-retirement programs, limiting new-hiring, or selling entiresubsidiaries, but generally cannot lay-off full-time employees within particular 23 Due to its previous status as a charitable trust, Wellcome faced far less stringent market expectationsthan Glaxo. According to the Economist, Glaxo has since the Wellcome merger laid-off around 7,500managers and scientists from the combined firm’s staff of 61,500 (Economist, 1997a).
departments. In recent years the largest German pharmaceutical firms, Bayer andHoechst, have both attempted to increase the number of therapeutic areas within whichthey are active. This mirrors the strategy taken by the largest UK and US firms, andallows each of these firms to increase its capacity to scan different research programsoccurring within universities and biotech firms. One probable reason why German firmshave a lower rate of return on R&D (in terms of new blockbuster) is that they cannotquickly cut research programs that are not producing commercially viable results.
Compared to UK firms, German firms cannot simply decide to lay-off research personneldedicated to research programs that are not yielding commercially viable products.
A possible recourse for German firms is to limit research to a small number oftherapeutic areas in which the company has a proven record of success. This is thestrategy taken by the medium-sized German pharmaceutical firms (Schering andBoehringer Ingelheim, for example).24 However, this has the adverse consequence oflimiting the absorptive capacity of the company. Without a number of ‘platforms’ indifferent therapeutic areas, the ability of German firms to scan basic research in biotechfirms and at universities becomes less. Furthermore, firms with a less varied productportfolio cannot create an efficient world-wide distribution and marketing network(which becomes more cost-effective the more drugs the company has to sell). Thesefirms may become take-over candidates as a result.25 iii) differences in the national systems of innovation within UK and Germanpharmaceutical firms are embedded have also played a role. UK firms are embeddedwithin a vibrant bio-medical research community with a growing infrastructure of biotechstart-up firms. According to a recent survey, over half the biotechnology companiesactive in Europe exist in the UK (Economist, 1997b). UK pharmaceutical firms enjoyaccess to a wealth of home market research firms that have been slow to develop inGermany.26 This has probably influenced the speed with which UK firms haveincorporated new research methodologies into their own operations, and helped themquickly establish joint ventures and licensing agreements with biotech firms.
Over recent years German firms have invested large amounts of research anddevelopment funds into biotechnology, but they have had to do this almost entirely 24 This is not the only factor, of course, for a firm to choose to be present in only a few therapeuticareas. Other crucial factors include extremely high unit R&D development costs and lower access tocapital for mid-sized firms.
25 Note that Boehringer Mannheim has just been taken over by Roche (Ch).
26 European biotech has developed primarily within large pharmaceutical firms and in non-profitinstitutes such as universities. This is quite different from the US where there are a lot of start-ups.
There are more UK biotech start-ups than in Germany; one of the reasons is the unusual flotation ruleswhich have been in place since 1993 and allow biotech firms to be floated on the stock exchange withoutthe usual three years record of trading profits. However, the number of German biotech start-ups hasbeen increasing recently due to changes in the genetic engineering law, and the government activelypromoting the biotech industry (Financial Times, 26/11/96).
abroad. This is particularly true with the largest German firms, in particular Hoechst andBayer. Hoechst, for example, now spends over 60% of its total research anddevelopment abroad, and has 90 overseas R&D centres (Handelsblatt, 1996). It hastransferred most of its biotechnology research to US labs acquired during the take-overof Marion Merrell Dow, now spending about DM 400 million per year on biotechnology(Wirtschaftswoche, 1997). According to Sharp and Patel (1996), Hoechst and Bayereach have over a dozen different biotechnology collaborations with universities andbiotech firms in the United States. Bayer has one dedicated biotechnology lab inGermany, while Hoechst has none.
5. Conclusion
In this paper, we discussed differences in corporate governance institutions and thenational system of innovation in Germany and the UK, and how these differencesimpacted the firms’ organisational structure and ability to take advantage of changingtechnologies. UK firms rapidly developed new competencies in research, marketing anddistribution, outperforming their German competitors during the 1980s. We credit thissuperior response to national institutional frameworks in the areas of corporategovernance and the innovation system. UK corporate governance institutions give anadvantage in developing rapidly changing product market strategies necessitated bystructural market changes. Due to share-holder pressures linked to ownership structureand organisational flexibility, the UK pharmaceutical firms reacted more quickly thantheir German rivals to changed competitive conditions. Similarly, the national system ofinnovation encourages radical innovation; UK pharmaceutical firms were able to easilytap into these research communities.
Our findings must be situated within the broader findings by Porter (1990) and otherswho document strong cross-national variation in the product market strategies firmssuccessfully pursue. The Germans appear to be particularly successful within industriesnecessitating long-term capital investment, access to highly skilled workers, long-termmanagerial employment with relatively low-powered remuneration incentives, and in-house research and development. A large literature has emphasised the German successin industrial machinery, automobiles, specialty chemicals, etc., – all sectors in which thevery „short-termism“ that proves so successful in extremely turbulent markets hasundermined UK firm performance (see Katzenstein, 1989, Streeck, 1992).
Furthermore, we observe that the leading German pharmaceutical firms have, in recentyears, strongly reacted to the changing industry dynamics. As discussed above, themajority of value-added within pharmaceuticals consists not in discovery, butdevelopment and marketing and distribution. German pharmaceutical firms, lead byHoechst, have created elaborate international production chains during the 1990s. The leading firms have spent billions of dollars creating research and development networksin biotechnology. However, in contrast with the UK firms, this money has not beeninvested in the domestic market, but primarily in overseas networks, accessing the USscience base. Compounds developed abroad can be easily transferred back to Germany,where further development may ensue.
This leads to a powerful argument against those arguing that globalisation must lead to aconvergence of institutional frameworks (Ohame, 1991). German firms are adjusting tochanges in the pharmaceutical industry, but not through attempting to reconfigureGerman corporate governance or innovation institutions (if indeed, that were possible).
In this case, German firms are embracing globalisation, but are continuing to investwithin the national economies where the organisational competencies for each part of thevalue-chain may most easily be created.
Aoki, M. 1990, ‘Towards an economic model of the Japanese firm’, Journal of Economic Perspectives, 28, 1-27.
Ballance, R., Pogany, J. and H. Forstner, 1992, The World’s Pharmaceutical Industries: An International Perspective on Innovation, Competition and Policy, London:Edward Elgar.
Bower, J., 1970, Managing the Resource Allocation Process. Boston: Harvard Charkham, J., 1995, Keeping Good Company: A Study of Corporate Governance in Five Countries, Oxford: Oxford University Press.
Cockburn, I. and Henderson, R., 1996, ‘Public-private interaction and the productivity of pharmaceutical research’, working paper prepared for the 1996 Micro-BPEAConference.
Di Masi, J., Hansen, R., Grabowski, H., and Lasagna, L., 1991, ‘Cost of innovation in the pharmaceutical industry’, Journal of Health Economics, 10, 107-142.
Doz, Y., 1992, ‘The role of partnerships and alliances in European industrial restructuring’, in Cool, K., Neven, D. and Walter, I. (eds.), European IndustrialRestructuring in the 1990’s, Macmillan Press.
Economist. 1997a. ‘Coping with unwellcome news’, April 26, 59-60.
Economist. 1997b. ‘A bio-buble’, July 19, 62-63 Florida, R. and Kenney, M., 1988, ‘Venture capital-financial innovation and technological change in the USA’, Research Policy, 17, 119-137.
Frankfurter Allgemeine Zeitung., 1993. ‘Die gentechnischen Genehmigungsverfahren Frankfurter Allgemeine Zeitung., 1996. ‘Hoechst verlagert immer mehr Forschung in Gambardella, A. 1995, Science and Innovation: the US Pharmaceutical Industry in the 1980s, Cambridge University Press, Cambridge.
Grabowski, H. and J. Vernon, 1990, ‘A new look at the returns and risks to pharmaceutical R&D’, Management Science, 36, 804-821.
Grabowski, H. and J. Vernon, 1994a, ‘Innovation and structural change in pharmaceuticals and biotechnology’, Industrial and Corporate Change, 3, 435-449.
Grabowski, H. and J. Vernon, 1994b, ‘Returns to R&D on new drug introductions in the 1980s’, Journal of Health Economics, 13, 383-406.
Handelsblatt, 1996a, ‘Massive Behinderung der Forschung’, March 21.
Handelsblatt, 1996b, ‘Frauenhofer-Gesellschaft und Sparkassen kooperieren’, May 25.
Handelsblatt, 1996c, ‘Risikokapital für Ost und West’, July 8.
Handelsblatt, 1996, ‘Im Pharmageschäft bleiben große Aufgaben’, November 11.
Helms, R. (ed), 1996, Competitive Strategies in the Pharmaceutical Industry, American Enterprise Institute for Public Policy Research, Washington.
Henderson, R., 1994, ‘The evolution of integrative capability: innovation in cardiovascular drug discovery’, Industrial and Corporate Change, 3, 607-630.
Henderson, R. and Cockburn, I., 1994, ‘Measuring competence? Exploring firm effects in pharmaceutical research’, Strategic Management Journal, 15, 63-84.
Henderson, R. and Cockburn, I., 1996, ‘Scale, scope and spillovers: the determinants of research productivity in drug discovery’, Rand Journal of Economics, 27, 32-59.
Hollingsworth, R., 1997, Continuities and changes in social systems of production: the cases of Germany, Japan, and the United States, in R. Hollingsworth and R. Boyered. Contemporary Capitalism. Cambridge: Cambridge University Press.
Katzenstein, P., 1989, ‘Stability and change in the emerging third republic’ in Katzenstein P., ed., Industry and Politics in West Germany, Ithaca: CornellUniversity Press.
Kenney, M., 1986, ‘Schumpeterian innovation and entrepreneurs in capitalism: a case study of the US biotechnology industry’, Research Policy, 15, 21-31.
Kornberg, A. 1995, The Golden Helix: Inside Biotech Ventures, Berkeley: University of Lehrer, M., 1997, ‘German industrial strategy in turbulence: corporate governance and managerial hierarchies in Lufthansa’, Industry and Innovation, 4, 115-140.
Lehrer, M., forthcoming, „Comparative institutional advantage in corporate governance and managerial hierarchies: the case of European airlines,“ doctoral dissertation,INSEAD.
Matraves, C. A., 1996, ‘The determinants of market structure in manufacturing industry’, PhD thesis, University of East Anglia, Norwich.
Matraves, C., 1997, ‘Market structure, R&D and advertising in the pharmaceutical McGahan, A., 1994, ‘Industry structure and competitive advantage’, Harvard Business Review, November-December, 115-124.
Nelson, R., 1993, National Innovation Systems, New York: Oxford University Press.
Oliveira Martins, J., Scarpetta, S., and Pilat, D., 1996, ‘Mark-up ratios in manufacturing industries: estimates for 14 OECD countries’, OECD Economics DepartmentWorking Papers, no. 162.
Ohame, K., 1991, The Borderless World, New York: Harper.
Panorama of EC Industry, Commission of the European Communities, Brussels - 1994, Patel, P., 1995, ‘Localised production of technology for global markets’, Cambridge Journal of Economics, 19, 141-153.
Pavitt, K., 1991, ‘What makes basic research useful?’, Research Policy, 20, 109-119.
Penan, H., 1996, ‘R&D Strategy in a techno-economic network: Alzheimer’s disease therapeutic strategies’, Research Policy, 25, 337-358.
PhRMA Industry Profile, 1996 and 1997 issues, Washington DC.
Pisano, G. and S. Wheelwright, 1995, ‘The new logic of high-tech R&D,’ Harvard Porter, M., 1990, The Competitive Advantage of Nations, New York: The Free Press.
Powell, W., 1996. ‘Inter-organisational collaboration in the biotechnology industry’, Journal of Institutional and Theoretical Economics, 152:1, 197-215.
Schwartzman, D., 1976, Innovation in the Pharmaceutical Industry, Baltimore: The Sharp, M. and Patel, P. 1996, ‘Europe’s pharmaceutical industry: An innovation profile’, Draft Report Prepared for DG X111, European Commission.
Shoher, S. and Prevezer, M, 1996, ‘UK biotechnology: institutional linkages, technology transfer and the role of intermediaries’, R&D Manangement, 23, 3, 283-298.
Soskice, D., 1994, ‘Innovation strategies of companies: a comparative institutional analysis of some cross-country differences’, in W. Zapf, (ed.), Institutionvergleichund Institutionsdynamik, Berlin: Sigma.
Soskice, D., forthcoming, ‘Divergent production regimes: coordinated and uncoordinated market economies in the 1980s and 1990s’, in Kitschelt, H., and al(eds.), Continuity and Change in Contemporary Capitalism, New York:Cambridge University Press.
Streeck, W., 1992, ‘On the institutional preconditions of diversified quality production’, in Streeck, W. Social Institutions and Economic Performance. London andNewberry Park Sage Productions.
Teece, D., 1986, ‘Profiting from technological innovation: implications for integration, collaboration, licensing and public policy’, Research Policy, 15, 285-305.
Thomas, L. G., 1996, ‘Industrial policy and international competitiveness in the pharmaceutical industry’, in Helms, R. (ed), Competitive Strategies in thePharmaceutical Industry, AEI Press, Washington.
Vitols, S., 1995a, ‘Corporate governance versus economic governance: banks and industrial restructuring in the US and Germany’, WZB Discussion Paper, FS95-1,312.
Vitols, S., 1995b, ‘Are German banks different?’, WZB Discussion Paper, FS95-1, 308.
Werth, B., 1994, The Billion-Dollar Molecule, Touchstone, Simon & Schuster, New Wirtschaftswoche. 1997. ‘Unmut und Nervosität’, April 24th, 52-54.


Microsoft word - brochure_copy_2.docx

Medical Brochure Copy Sample Outside Alzheimer’s Statistics • Alzheimer’s disease strikes 8 to 15 percent of people over age 65 years, with the number of cases doubling every 5 years of age after 60. Alzheimer’s disease is thought to be responsible for 60 to 70 percent of all cases of dementia and is one of the leading causes of nursing home placements. ~ Healthy Peop

Sept 06 fs.xls

Green Party of Canada 10-23-06 Accrual Basis Profit & Loss YTD Comparison September 2006 Jan - Sep 06 4-0500 · Federal Government 4-1000 · Contributions 4-2000 · Monthly Contributions 4-3000 · Transfers In 4-8000 · Other Income Total Income Cost of Goods Sold 5-5500 · Transfers Out Total COGS Gross Profit 6-1000 · Advertising 6-1300

Copyright © 2014 Articles Finder