Exploitative and Explorative Learning as a Response to the TRIPS Agreement in Indian Pharmaceutical Firms

The intellectual property regime forms an important part of any government's economic and industrial policies. It is an important regulatory instrument not only affecting industry and market structure but also influencing firm-level learning strategies, especially in knowledge-based industries like pharmaceuticals. Given its crucial role, the strengthening of patent laws as a result of the Trade Related Intellectual Property Rights (TRIPS) agreement presents a significant institutional change for developing country industry. This paper analyses Indian pharmaceutical firms' strategic response to the strengthening of patent law. The research in this paper shows that Indian pharmaceutical firms responded to anticipated disruptive regulatory change by developing competencies incrementally as well as radically. Ambidextrous capability development involved explorative investment in R&D to develop innovative product R&D competencies and in parallel also involved exploitative use of existing process R&D capabilities. This ambidextrous capability development has enabled Indian pharmaceutical firms to survive and compete with multinational corporation (MNC) pharmaceutical firms, showing other catch-up firms a different path of capability development.