On the profitability of strategic research networks: a simulation model for pharmaceuticals

This paper analyses the profitability of research networks in the pharmaceutical industry where R&D–based activities are of great importance for the companies following the offensive research strategy, i.e., generating original drugs. There are also companies who follow the defensive strategy, i.e., develop generic drugs. We focus on the issue how knowledge–related capabilities can be utilised when trying to profit from innovations. The larger the knowledge pool to be used by the companies, the higher is the probability to profit from new innovation. This is one of the greatest motivations to establish strategic research networks. However, the more innovative the offensive companies are the more opportunities there are also for defensive companies. We tackle this innovation race by a simulation model that scrutinises the profitability of research networks in the three company world where tacitness, legal appropriability means, and absorptive capacities are used as means of technology strategies.