Managing research collaborations as a portfolio of contracts: A risk reduction strategy by pharmaceutical firms

Abstract

This paper presents an empirically derived model of the process through which firms facing high R and D risks and costs, leverage their limited R and D resources, by contracting out upstream (laboratory scale) research at low cost for a portfolio of R and D projects to not-for-profit technology institutions. They then concentrate their resources on downstream (commercial scaleup) research utilizing the limited set of successful upstream research outputs received from their collaborators. This risk reduction strategy is adopted by pharmaceutical firms which typically face both intense new product competition as well as high failure risks in upstream research. The process model has been developed by drawing from and synthesizing in-depth project case studies of pharmaceutical firms. Apart from contributing to theory, this model can enable practitioners in both firms and technology institutions to understand effective processes required for initiating and implementing such a strategy for mutual benefit.