Blockbusters, Sequels and the Nature of Innovation

Wesley M. Cohen, Matthew Higgins, William D. Miles and Yoko Shibuya

No 33957, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using detailed product- and invention-level data from the pharmaceutical industry, we demonstrate that firms with high-selling “blockbuster” drugs concentrate their development efforts on new drugs that target the same customer segments and are technologically similar to existing offerings. We propose that this pattern can be explained by an expectation of “demand stickiness”, whereby firms expect current sales to persist when follow-on products offer similar functionality, making investment in the development of similar technology within that customer segment more likely. Firms’ marketing and R&D capabilities reinforce this behavior, but they do not fully explain it. By shifting the focus from firm-level characteristics to product-level drivers of innovation, our findings highlight how the commercial success of individual products shapes the direction of technological change in R&D-intensive industries.

JEL-codes: O3 O31 O33 (search for similar items in EconPapers)
Date: 2025-06
New Economics Papers: this item is included in nep-bec, nep-ind, nep-ino, nep-inv, nep-sbm and nep-tid
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