From Old Competence Destruction to New Competence Access: Evidence from the Comparison of Two Discontinuities in Anticancer Drug Discovery

Research in creative destruction has argued that competence-destroying discontinuities result in incumbents' underperformance in research and development (RD that is, it requires assessment of both old capability obsolescence and new capability acquisition. I find evidence for this proposition in data from the biotechnology disruption to the anticancer drug market. In particular, my research design is a within-market matched pair of discontinuities: from chemotherapy to small-molecule targeted drugs, and from chemotherapy to large-molecule targeted drugs. Although equally competence destroying, the two discontinuities differ in the access incumbents have to the new capabilities required: whereas all new capabilities are available in the former, one new capability is inaccessible to incumbents (and to many entrants) in the latter. The contrasting results of these two discontinuities support my proposition: in the competence-destroying discontinuity with full access to new capabilities, incumbents did not fall behind entrants; in the other discontinuity, incumbents fell behind only those entrants that owned the difficult-to-access new capability. I close with implications for research in creative destruction, in rational adaptation to environmental change, and in strategic renewal.

[1]  R. Colwell.  Fulfilling the promise of biotechnology. , 2002, Biotechnology advances.

[2]  Chronic Disease Division.  Cancer facts and figures , 2010 .

[3]  J. Drews.  Into the 21st Century , 1993, Bio/Technology.

[4]  H. P. Lang,et al.  Drug Discovery And Development- Technology In Transition , 2009 .

[5]  Wendy K. Smith,et al.  A Structural Approach to Assessing Innovation: Construct Development of Innovation Locus, Type, and Characteristics , 2002, Manag. Sci..

[6]  Nelson Phillips,et al.  Technology and Organization: Essays in Honour of Joan Woodward , 2010 .

[7]  Sarah Kaplan,et al.  Entrepreneurship and the Construction of Value in Biotechnology , 2008 .

[8]  P. Tyle,et al.  Monoclonal antibodies, immunoconjugates, and liposomes as targeted therapeutic systems. , 1990, Targeted diagnosis and therapy.

[9]  Constance E. Helfat,et al.  The birth of capabilities: market entry and the importance of pre-history , 2002 .

[10]  Gino Cattani,et al.  Preadaptation, Firm Heterogeneity, and Technological Performance: A Study on the Evolution of Fiber Optics, 1970–1995 , 2005, Organ. Sci..

[11]  J. Tilton.  International diffusion of technology : the case of semiconductors , 1971 .

[12]  P. Tyle,et al.  Targeted therapeutic systems , 1990 .

[13]  P. Schoemaker,et al.  Strategic assets and organizational rent , 1993 .

[14]  F. Rothaermel.  Incumbent's advantage through exploiting complementary assets via interfirm cooperation , 2001 .

[15]  David C. Mowery,et al.  Paths of Innovation: Technological Change in 20th-Century America , 1998 .

[16]  D. B. Montgomery,et al.  First‐mover advantages , 1988 .

[17]  David E. Golan,et al.  Protein therapeutics: a summary and pharmacological classification , 2008, Nature Reviews Drug Discovery.

[18]  M. Hannan,et al.  Structural Inertia and Organizational Change , 1984 .

[19]  R. Slater,et al.  Magic cancer bullet : how a tiny orange pill is rewriting medical history , 2003 .

[20]  Kenneth J. Hillan,et al.  Discovery and development of bevacizumab, an anti-VEGF antibody for treating cancer , 2004, Nature Reviews Drug Discovery.

[21]  Rebecca Henderson,et al.  DO FIRMS CHANGE CAPABILITIES BY HIRING NEW PEOPLE? A STUDY OF THE ADOPTION OF SCIENCE-BASED DRUG DISCOVERY , 2004 .

[22]  Karel Cool,et al.  Asset stock accumulation and sustainability of competitive advantage , 1989 .

[23]  Charles Williams,et al.  Focusing Firm Evolution: The Impact of Information Infrastructure on Market Entry by U.S. Telecommunications Companies, 1984 - 1998 , 2004, Manag. Sci..

[24]  Gary Walsh,et al.  Biopharmaceuticals: Biochemistry and Biotechnology , 1998 .

[25]  J. Barney.  Firm Resources and Sustained Competitive Advantage , 1991 .

[26]  J. P. Eggers,et al.  Cognition and Renewal: Comparing CEO and Organizational Effects on Incumbent Adaptation to Technical Change , 2009, Organ. Sci..

[27]  R. Rumelt.  Theory, Strategy, and Entrepreneurship , 2005 .

[28]  Constance E. Helfat,et al.  Strategic Renewal of Organizations , 2009, Organ. Sci..

[29]  W. S. Comanor,et al.  Strategic Pricing of New Pharmaceuticals , 1998, Review of Economics and Statistics.

[30]  Phanish Puranam,et al.  Integrating Acquired Capabilities: When Structural Integration is (Un)Necessary , 2005 .

[31]  Cynthia A. Montgomery,et al.  Diversification, Ricardian rents, and Tobin's q , 1988 .

[32]  Mary Tripsas.  Unraveling The Process Of Creative Destruction: Complementary Assets And Incumbent Survival In The Typesetter Industry , 1997 .

[33]  Clayton M. Christensen.  The Innovator's Dilemma: The Revolutionary Book That Will Change the Way You Do Business , 2011 .

[34]  Robert J. Moore,et al.  A chronology of medicine and related sciences , 1997 .

[35]  R. Katila,et al.  Where do resources come from? The role of idiosyncratic situations , 2004 .

[36]  Alex Matter,et al.  Glivec (STI571, imatinib), a rationally developed, targeted anticancer drug , 2002, Nature Reviews Drug Discovery.

[37]  R. Bazell.  Her-2: the making of herceptin, a revolutionary treatment for breast cancer , 1998 .

[38]  D. Teece.  Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy , 1993 .

[39]  W. Mitchell.  Dual clocks: Entry order influences on incumbent and newcomer market share and survival when specialized assets retain their value , 1991 .

[40]  M. Tushman,et al.  Technological Discontinuities and Organizational Environments , 1986 .

[41]  E. Penrose.  The theory of the growth of the firm twenty-five years after , 1960 .

[42]  M. Lourdes Sosa,et al.  Application-Specific R&D Capabilities and the Advantage of Incumbents: Evidence from the Anticancer Drug Market , 2009, Manag. Sci..

[43]  Boris Groysberg,et al.  Can They Take It With Them? The Portability of Star Knowledge Workers' Performance , 2004, Manag. Sci..

[44]  Anita M. McGahan,et al.  Business strategy over the industry life cycle , 2004 .

[45]  B. Wernerfelt,et al.  A Resource-Based View of the Firm , 1984 .

[46]  B. Chabner,et al.  Chemotherapy and the war on cancer , 2005, Nature Reviews Cancer.

[47]  Jesper B. Sørensen,et al.  Aging, Obsolescence, and Organizational Innovation , 2000 .

[48]  J. Barney.  Strategic Factor Markets: Expectations, Luck, and Business Strategy , 1986 .

[49]  Maryann P. Feldman,et al.  The Locational Dynamics of the U.S. Biotech Industry: Knowledge Externalities and the Anchor Hypothesis , 2005 .

[50]  Sendil K. Ethiraj,et al.  Where Do Capabilities Come from and How Do They Matter? A Study in the Software Services Industry , 2005 .

[51]  Samuel B. Bacharach,et al.  Research in the Sociology of Organization. , 1994 .