Biopharmaceutical R&D outsourcing: Short-term gain for long-term pain?

Jack Scannell, Bruno Versaevel and Etienne Billette de Villemeur
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Jack Scannell: Science, Technology and Innovation Studies Subject Group [Edinburgh] - School of Social and Political Science [ Edinburgh] - The University of Edinburgh

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Abstract: Research and development (R&D) outsourcing offers some obvious productivity benefits (e.g., access to new technology, variabilised costs, risk sharing, etc.). However, recent work in economics points to a productivity headwind at the level of the innovation ecosystem. The market for technologies with economies of scope and knowledge spillovers (those with the biggest impact on industry economics and social welfare) has structural features that allow customers to capture a disproportionate share of economic value and transfer a disproportionate share of economic risk to technology providers, even though the providers aim to maximise profit. This reduces the incentives to invest in new ventures that specialise in the most promising early-stage projects. Therefore, near-term gains from R&D outsourcing can be offset by slower innovation in the long run.

Keywords: Research; Development; Biotechnology; Pharmaceuticals; Externalities; Outsourcing (search for similar items in EconPapers)
Date: 2022-11
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Published in Drug Discovery Today, 2022, 27 (11), pp.103333. ⟨10.1016/j.drudis.2022.08.001⟩

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Working Paper: Biopharmaceutical R&D outsourcing: Short-term gain for long-term pain? (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03967759

DOI: 10.1016/j.drudis.2022.08.001

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