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

This research proposes an empirically derived model of the process through which firms facing high R&D risks and costs, leverage their limited R&D resources, by contracting out upstream (laboratory scale) research at low cost for a portfolio of R&D projects to not-for-profit technology institutions. The firms then concentrate their limited R&D resources on downstream (commercial scale) R&D that utilises the limited set of successful upstream research outputs received from their collaborators. Small pharmaceutical firms that typically face both intense new product competition as well as high failure risks in upstream research adopt this risk reduction strategy. The process model has been developed by drawing from and synthesising in-depth project case studies of small pharmaceutical firms. Apart from contributing to the literature on managing technological collaboration, this model can enable practitioners in both firms and technology institutions to understanding effective processes for initiating and implementing this mutually beneficial risk reduction strategy.

Keywords: process model, research collaborations, technology institutions, pharmaceutical firms, option, portfolio, risk management