Managing external knowledge for new product development: The case of UK biopharmaceutical SMEs

The increased competition and market dynamism creates additional challenges for bio-pharmaceutical SMEs. Because of their specific profile, these SMEs must identify, access and manage external knowledge resources in order to successfully complete a development project. They often get integrated in complex open innovation networks, collaborating with research institutions and other bio-pharmaceutical companies. The classical model of closed innovation was based on the need to closely control the innovation process and its outputs (Chesbrough 2003). Nowadays, this model is challenged by the evolution of the market structure. The focus of market exchanges has shifted from transactions to relationships, and the value-chain model advocated by Porter is often replaced by a value-constellation, which implies a process of value cocreation among the various actors of the commercial environment. In this context, the model of open innovation becomes often a necessity for sustaining the competitiveness of the firm in the face of rapid and unpredictable market evolutions. This paper attempts to investigate the application and the suitability of the open innovation model in the pharmaceutical industry. After discussing the specific characteristics of the pharmaceutical sector, and the process of product research and development, the study analyses not only present the existing models of open innovation that are applicable to biopharmaceutical SMEs, focusing on the factors that might facilitate the development of open innovation systems. On the basis of these factors, a series of research hypothesis are developed, which are then verified through the analysis of primary data, collected from 23 managers working in the UK bio-pharmaceutical sector. The interpretation of research findings is synthesised in a model of open innovation systems in the UK pharmaceutical industry. The paper concludes with a series of propositions that outline for pharma managers and professionals the practical requirements for the implementation and exploitation of an efficient open innovation system.