Introduction

In this chapter we explore the relationships between entry, market structure, and innovation in the pharmaceutical industry, on the basis of a previous “history-friendly” model (HFM) developed by Malerba and Orsenigo (2002). The motivations underlying this modeling style have been discussed extensively in previous papers (Malerba et al., 1999, 2001), and we will not come back to this issue here. For the purposes of the present chapter, suffice it to say that HFMs are an approach to the construction of formal evolutionary economic models aiming at capturing – in stylized form – qualitative theories about mechanisms and factors affecting industry evolution and technological and institutional change suggested by empirical research.

In this respect, the pharmaceutical industry constitutes an ideal subject for history-friendly analysis. Pharmaceuticals are traditionally a highly R&D-intensive sector, which has undergone a series of radical technological and institutional “shocks.” However, the core of leading innovative firms and countries has remained quite small and stable for a very long period of time, but the degree of concentration has been consistently low, whatever the level of aggregation being considered.

In a previous study (Malerba and Orsenigo, 2002), we claimed that the patterns of the evolutionary dynamics that emerged were related to the following main factors.

1. (a) The nature of the processes of drug discovery – i.e. to the properties of the space of technological opportunities and of the search procedures through which firms explore it. Specifically, innovation processes have been characterized for a very long time by low degree of cumulativeness and by “quasi-random” procedures of search (randoms creening). Thus, innovation in one market (a therapeutic category) does not entail higher probabilities of success in another one.

2. […]