INNOVATIVE PRODUCTIVITY IN PHARMACEUTICAL FIRMS

OVERVIEW: As mergers and acquisitions continue throughout the pharmaceutical industry, firms grow larger. Yet, in pharmaceutical research, bigger is not necessarily better. Evidence from a 19-year study of new product output across 31 firms suggests that the number of new chemical entities produced per R&D dollar is not enhanced by ever-increasing firm size. As a result, large pharmaceutical firms should consider restructuring and rationalizing their R&D efforts with an eye toward trying to create a smaller firm atmosphere within their larger firm environment. Tactics available to help realize this goal include decentralization, nurturance of researchers, and strategic alliances with other firms.