Barriers to Outbound Open Innovation in large biopharmaceutical enterprises
Summary
Open Innovation (OI) represents a newly emerging business model across a wide range of industries, enabling an ‘open’ flow of internal and external expertise across company barriers in order to enhance innovation and commercialization success. Two dimensions of OI can be distinguished: inbound OI refers to accessing external expertise in order to advance internal development (e.g. via in-licensing), whereas outbound OI refers to the transfer of internal assets or expertise to an external party (e.g. via out-licensing).
A sector showing strong signs of OI implementation already is represented by the biopharmaceutical industry. Whereas among the larger established pharmaceutical companies inbound OI represents a yet long established tradition, the outbound dimension is still largely neglected. However, outbound OI (OOI) engagement can positively affect firm performance by offering the opportunity to exploit non-core assets and enhancing the probability of success of strategic assets by transferring them to suitable external parties depending on the needs for successful development and commercialization.
It was the goal of this research to identify the associated barriers hindering large established pharmaceutical companies from pursuing OOI practices despite these compelling rationales for outbound OI adoption. To this end, a qualitative multiple case study approach was chosen where twelve representatives of nine (non-biotech) pharmaceutical companies were interviewed regarding their company’s position towards OOI.
Major identified barriers consisted in resource competition of inbound vs. outbound activities, a too high effort-return ratio, as well as psychological barriers such as the fear of weakening one’s own competitive position, and external players doubting asset quality.
In order to overcome those barriers, managerial measures should encompass systematization of the OOI process in order to decrease the associated effort. Furthermore, overall corporate alignment regarding awareness on OOI benefits has to be established to ensure suitable resource allocation and support minimizing inbound-outbound competition. In addition, the involvement of a third party acting as ‘OOI intermediary’ organizing the process, finding partners, etc. could represent a suitable approach to mitigate OOI-associated barriers. Psychological barriers will presumably disappear once the community of larger pharmaceutical enterprises has become more familiar with this new approach and more practical examples of successful OOI are available.
Summarizing, OOI engagement among large established pharmaceutical companies is still in its initial phase, its implementation hindered by several barriers. Yet, efforts to systematize the OOI process are already discernable, indicating that in the future OOI might become part of the new business model within the sector of established pharmaceutical companies providing added value complementary to the main product business.