Research Seminars

Institutions & Innovations: A Longitudinal Study of Institutional Endorsement and Firm Innovation in the Pharmaceutical Industry, 1980-2004

Speaker: Francisco POLIDORO
University of Michigan

23 January 2006 - From 16:30 to 19h

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In my dissertation I examine two puzzles concerning the interplay between firm innovation and institutional constituents. First, I investigate how firms can influence the regulatory approval of innovations. Prior literature has shown that firms can shape institutions but little is known about how firms can affect decisions made by institutional constituents, such as regulatory structures, which by their very constitution are not easily influenced directly by firms. I argue that firms seek endorsement of an innovation by a more pliable constituent in order to affect the decisions made by regulators. I situate my arguments in the context of the assessment of product innovations and argue that firms seek the endorsement of new products by the scientific community to accelerate regulatory approval and, by extension, the introduction of new products into the market. Second, I analyze how firms' attempts to secure endorsement affect subsequent competition. Prior research has highlighted the benefits of endorsement but the consequences of endorsement for competition between firms have been largely overlooked. Endorsement of an innovation by a relevant institutional constituent makes the underlying opportunity more salient to rival firms, thus contributing to the introduction of similar innovations. I argue that the endorsement by the scientific community of an innovative product building on novel science makes rival firms more likely to introduce similar products drawing on the new scientific knowledge. If, on the one hand, firms can use endorsement to influence regulatory structures, on the other hand, the endorsement of an innovation attracts competition. I test my arguments using longitudinal data on new pharmaceutical drugs introduced between 1980 and 2004.

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