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Session Overview
Session
21-PM2-05: ST10.1 - The Future of R&D and Innovation
Time:
Friday, 21/Jun/2019:
2:45pm - 4:15pm

Session Chair: Sven Schimpf, Fraunhofer Group for Innovation Research
Session Chair: Andrew James, Manchester Institute of Innovation Research
Location: Room 2.2.35 (ENSTA)

Session Abstract

Within the last decades, R&D and Innovation Management practices changed due to upcoming new challenges, societal developments and technological possibilities. R&D and innovation processes are nowadays are more effective, taking into account a wider range of developments in the environment of an organisation and more efficient than in previous generations of R&D and innovation management while dealing with a new level of complexity and the challenge of increasing convergences and cross-disciplinarity.

A key challenge however remains the early recognition of future developments and trends in R&D and Innovation Management. This track will address foresight activities dealing with the identification and/or analysis of next decade’s key topics in R&D and Innovation Management from an industrial and scientific perspective.


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Presentations

Process Innovation in the pharmaceutical industry

Ivan LUGOVOI1, Dimitrios ANDRITSOS1, Claire SENOT2

1HEC Paris, France; 2Tulane University. Freeman School of Business

Context

We explore the economic effects of process innovation on pharmaceutical manufacturing and construct a unique dataset that: i) evaluates process innovation through a detailed observation of portfolios of process patents and ii) measures key qualitative dimensions of process innovation, such as novelty, scope of protection and locus of application

Literature

Burns LR (2012) The business of healthcare innovation (Cambridge University Press).

Griliches Z (1990) Patent statistics as economic indicators: A survey. J. Econom. Literature 28:1661–1707.

Mihm J, Sting FJ, Wang T (2015) On the effectiveness of patenting strategies in innovation races. Management Sci. 61(11):2662–2684.

Pisano GP (1997) The development factory: Unlocking the potential of process innovation (Harvard Bus. Press).

Literature Gap

Despite its perceived influence over a firm’s economic performance, process innovation has received substantially less attention than product innovation in past research. This work seeks to address this gap by exploring in depth and quantifying the association between process innovation and economic performance.

Research Questions

How does a firm’s process-innovation portfolio relate

to this firm’s economic performance?

Methodology

Through a collaboration with expert patent attorneys we develop a unique longitudinal dataset that combines secondary data and evaluations of a firm’s portfolio of process patents along three key dimensions: novelty, scope, and locus. We conduct econometric analyses for a large-scale sample of drugs open to competition from generics, for which process innovation is the main source of competitive advantage.

Empirical Material

We collect data from four countries: the U.S. (33.7% of the global generics market), France (9.8% of the European generics market), Spain (6.5% of the European generics market), and Italy (2.5% of the European generics market) (Source: IMS Health). We choose these specific markets because the U.S. is the largest pharmaceutical market worldwide, and France, Italy, and Spain are all within the top five European pharmaceutical markets.

Results

We find a positive association between overall process innovation and firm performance. When differentiating between dimensions of process innovation, results further suggest that high novelty is benefi- cial, and complemented by a broad scope, but only for patents applying to the later phase of the pharma- ceutical manufacturing process.

For each of the 50 drugs included in our final sample, we collect all firm quarterly sales observed in each of the four countries considered, as well as all related process patents, over a period of 40 quarters, from January 2005 (when our data provider implemented its current database structure) to December 2014 (the latest data available when we initiated this study). The resulting final dataset includes 43,280 drug-firm-country-quarter observations that relate to 675 unique pharma- ceuticals (original and generic versions) produced by 206 global corporate groups (referred to as “firms” in the remainder of the paper). These firms own a total of 228 individual process patents, which can be further grouped into 216 unique portfolios–with 61% of these portfolios consisting of two or more patents. Table 1 details the number of drugs, firms, patents, and portfolios by country in our final dataset.

Contribution to Scholarship

Our study uniquely conducts a multi-dimensional evaluation of a firm’s portfolio of process innovations at the product level. This allows a quantitative beneficial of both the relative benefit of the different dimensions of a portfolio as well as the potential complementarities between these.

Contribution to Practice

Our results provide pharmaceutical practical insights that can inform process- related R&D investments in the pharmaceutical sector. In particular, it may not be economically beneficial to invest in high-novelty process innovations in early production stages, which are characterized by numerous opportunities to innovate with potentially higher but less predictable economic payoffs. On the other hand, at later stages of the production process, where the opportunities to innovate are less numerous with potentially lower but more predictable economic payoffs, portfolios that are jointly characterized by high novelty and high scope could be more valuable.

Fitness

Process innovation is commonly claimed to be a major source of competitive advantage for firms. Despite this perceived influence much uncertainty remains about its true association with firm performance. We investigate the relationship between a pharmaceutical manufacturing firm’s process-innovation portfolio and its economic performance.

Bibliography

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Adner R, Levinthal D (2001) Demand heterogeneity and technology evolution: Implications for product and process innovation. Management Sci. 47(5):611–628.

Aharonson BS, Schilling MA (2016) Mapping the technological landscape: Measuring technology distance, technological footprints, and technology evolution. Res. Policy 45(1):81–96.

Arellano M, Bond S (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Rev. Econom. Stud. 58(2):277–297.

Arellano M, Bover O (1995) Another look at the instrumental variable estimation of error- components models. J. Econometrics 68(1):29–51.

Baldwin J, Hanel P, Sabourin D (2000) The determinants of innovation in Canadian manufacturing firms.

Ballot G, Fakhfakh F, Galia F, Salter A (2015) The fateful triangle: Complementarities in per- formance between product, process and organizational innovation in France and the UK. Res. Policy 44(1):217–232.

Bennett B, Cole G (2003) Pharmaceutical production: An engineering guide (IChemE).

Bessen J (2009) Estimates of patent rents from firm market value. Res. Policy 38(10):1604–1616. Blind K, Edler J, Frietsch R, Schmoch U (2006) Motives to patent: Empirical evidence from

Germany. Res. Policy 35(5):655–672.

Blundell R, Bond S (1998) Initial conditions and moment restrictions in dynamic panel data models.

J. Econometrics 87(1):115–143.

Bond SR (2002) Dynamic panel data models: a guide to micro data methods and practice. Por-

tuguese econom. J. 1(2):141–162.

Burns LR (2012) The business of healthcare innovation (Cambridge University Press).

Carroll S (2009) Goodbye blockbuster medicines; hello new pharmaceutical business models. Phar-

maceutical J. 282(7555):681–682.

Caves RE, Whinston MD, Hurwitz MA (1991) Patent expiration, entry, and competition in the

U.S. pharmaceutical industry. Brookings papers on econom. activity. Microeconomics 1–66. Ceccagnoli M (2009) Appropriability, preemption, and firm performance. Strategic management J.

30(1):81–98.

Crossan MM, Apaydin M (2010) A multi-dimensional framework of organizational innovation: A systematic review of the literature. J. Management Stud. 47(6):1154–1191.

De Figueiredo JM, Kyle MK (2006) Surviving the gales of creative destruction: The determinants of product turnover. Strategic Management J. 27(3):241–264.

Fleming L, Sorenson O (2004) Science as a map in technological search. Strategic Management J. 25(89):909–928.

Fresard L (2010) Financial strength and product market behavior: The real effects of corporate cash holdings. J. Finance 65(3):1097–1122.

Friberg R, Sanctuary M (2017) The effect of retail distribution on sales of alcoholic beverages. Marketing Sci. 36(4):626–641.

Gad SC (2008) Pharmaceutical manufacturing handbook: Production and processes, volume 5 (John Wiley and Sons).

Gilbert R, Shapiro C (1990) Optimal patent length and breadth. RAND J. Econom. 21(1):106–112. Griliches Z (1990) Patent statistics as economic indicators: A survey. J. Econom. Literature

28:1661–1707.

Grimaldi M, Cricelli L, Di Giovanni M, Rogo F (2015) The patent portfolio value analysis: A new

framework to leverage patent information for strategic technology planning. Tech. Forecasting

Soc. Change 94(C):286–302.

Haeussler C, Harhoff D, Mueller E (2014) How patenting informs VC investors: The case of biotech-

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Hall BH (2000) Innovation and market value. Barrell R, Mason G, O’Mahony M, eds., Productivity,

innovation and economic performance, chapter 7, 177–198 (Cambridge University Press). Hickey A (2001) Pharmaceutical process engineering. Drugs and the Pharmaceutical Sciences (Tay-

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Kanavos P (2014) Measuring performance in off-patent drug markets: A methodological framework

and empirical evidence from twelve EU member states. Health policy 118(2):229–241. Kauffman SA, Lobo J, Macready WG (2000) Optimal search on a technology landscape. J. Econom.

Behavior Organ. 43(2):141–166.

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113–130.

Klomp L, Van Leeuwen G (2001) Linking innovation and firm performance: A new approach.

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Mihm J, Sting FJ, Wang T (2015) On the effectiveness of patenting strategies in innovation races. Management Sci. 61(11):2662–2684.

Morton FMS (1999) Entry decisions in the generic pharmaceutical industry. RAND J. Econom. 30(3):421.

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Will the R in R&D at large technology corporations disappear?

Johan Granholm

Lund University, Sweden

Context

The author has as a practitioner in industry for 25 years seen a shift in the attitude to corporate research. Previously, many large and established technology firms had substantial departments doing research. Over the years this has changed, and corporate research not seen as short term profitable has decreased.

Literature

A number of papers, including Arora et al (2017) indicate that the amount of in-house science in technology corporations is indeed decreasing. This is measured by the number of scientific papers published by corporate individuals. This could be a serious problem, as much of innovation until now has stemmed from the existence of both research and development within one organisation.

A parallel area which is well investigated (Fini et al 2018) is the commercialisation of science. This area is mainly concerned with individual R&D projects.

Literature Gap

The literature indicates that one reason could be that this work is now done at universities in cooperation with industry. There seems to be a lack of broad studies to show if this is true.

It is also unclear if this is an actual problem for the corporations.

Research Questions

Q: is there a shift to more cooperation with universities?

Q: could university cooperation be a functioning replacement for in-house science/research?

Methodology

The methodology is analytical.

A literature study (ongoing) intends to find examples that show if industry-university cooperation has indeed increased. In addition, data from Swedish state-sponsored cooperation projects during the last decades is being analysed.

Empirical Material

Not relevant.

Results

Farina et al (2016) point out that university collaboration is an essential part of company technology strategy.

However, as indicated by Hottenrott and Lopes-Bento (2016) among others, it is not always certain that R&D cooperation is beneficial for the participating firm.

There are also several indicators that cooperation between industry and academia can be complicated. Olander Roese and Batingan Paredes (2015) discuss at length the barriers that endanger successful collaboration. Among these are the different institutional norms, as well as a mutual lack of understanding regarding each other’s practices. They also propose that a common language should be adopted.

The preliminary results from the ongoing study suggests that to some extent, large technology corporations are moving their research out of the company and into cooperation with external partners. It is reasonable to believe that this will increase, in part caused by the combination of decreased interest in spending within the corporations, and increased interest in commercialisation of results within universities.

The appearance and increase of university-industry-government cooperation (Triple Helix) initiatives and projects also shows that governments, not least in Sweden, are convinced that this is the way forward and wish to facilitate and participate.

Contribution to Scholarship

Further research could be to investigate how the corporate decision making is done, when a shift away from in-house research is made.

Another field could be to compare new companies with established corporations. Many start-ups are built around research. Is it possible to find a model to predict when a new company becomes established enough to dare to cut down on in-house work?

Contribution to Practice

The main contribution to practice will be to show that both industrial corporations and universities should have a clear policy on cooperation that fits with the long term technology strategy, particularly for the corporation, which has to decide if there should be any in-house research at all. The partners should strive to form a common understanding and also a common language for cooperation, which means that one-off projects are probably not efficient.

Fitness

The theme of the conference is "The Innovation Challenge: Bridging Research, Industry and Society". It is certainly relevant to discuss the role major industry corporations will have in future innovation.

Bibliography

Arora, A., Belenzon, S. and Patacconi, A. (2017), The decline of science in corporate R&D. Strat Mgmt J. 2017;39:3–32. https://doi.org/10.1002/smj.2693

Farina et al. (2016) Management of R&D investment plan and product catalogue in a modern defense system company. IEEE Aerospace and Electronic Systems Magazine, vol. 31, no. 1, pp. 4-7, January 2016.

Fini, R. , Rasmussen, E. , Wiklund, J. and Wright, M. (2019), Theories from the Lab: How Research on Science Commercialization can Contribute to Management Studies. Jour. of Manage. Stud. doi:10.1111/joms.12424

Hottenrott, H. and Lopes‐Bento, C. (2016), R&D Partnerships and Innovation Performance: Can There Be too Much of a Good Thing?. J Prod Innov Manag, 33: 773-794. doi:10.1111/jpim.12311

Olander Roese, M., & Batingan Paredes, K. M. (2015), On collaboration between academia and practice for research and innovation: A pilot study for BillerudKorsnäs. Division of Innovation Engineering. Lund University.



Agile Development of Mechatronic Systems: Utopia or Reality - an Evaluation from Industrial Practice

Valentin Zimmermann1, Jonas Heimicke1, Thomas Alink2, Yasmin Dufner2, Albert Albers1

1Institute of Product Engineering (IPEK), Karlsruhe Institute of Technology (KIT); 2Hekatron Vertriebs GmbH (HVG)

Context

The development of mechatronic systems is characterized by the continuous handling of uncertainties, which companies increasingly face with agile approaches to project management. The use of agile approaches in the context of safety-relevant products and the challenges and effects they pose are the subject of this article.

Literature

The introduction of agile approaches in the domain of mechatronic system development without adaptation to the new requirements presents many theoretical challenges (Schmidt et al., 2017). These approaches are usually based on principles derived from phenomena that occurred in the development of pure software applications (Fowler & Highsmith, 2001). Accordingly, practices that follow these principles do not optimally support the mechatronic system development (Schmidt et al., 2017). A major challenge is the harmonisation and synchronisation of different domains involved in the development. The simple application of agile practices by a team in the development of a module does not automatically contribute to the agile and seamless development of the overall system (Eklund et al., 2014). If an agile approach is not developed for application in a particular context, it will not always be able to provide optimal support to development teams in that context (Heimicke et al., in press).

Literature Gap

In theory, many challenges have already been identified in the agile development of physical products, while their validity has been proven in artificially constructed laboratory studies far from reality. To derive and validate principles for approaches to support agile mechatronic system development, challenges of a real agile project are identified.

Research Questions

Which challenges arise in agile project management in mechatronic system development and what are their causes?

Which areas of action can be condensed from these challenges and transferred into principles to support mechatronic system development in order to implement a situation- and demand-oriented degree of agility in the process?

Methodology

First, common challenges in agile mechatronic system development were identified and clustered from the literature and a distinction was made whether these challenges were artificially constructed or quantitatively surveyed. The resulting clusters provide first search fields. By means of this, a real project, which was supported by agile project management and fully documented, is retrospectively analysed, by interviews with the main actors of the project and an analysation of the documentation. Finally, principles from agile approaches to support mechatronic system development and the handling of identified challenges are reviewed and expanded by means of the findings.

Empirical Material

The subject of the investigation was a product development project in the field of safety-relevant products. This project was supported by agile project management methods and the course of the project was fully documented. Developers from different domains, companies and departments were involved in the project. In addition to requirement lists, the project results and different degrees of maturity within the project, the respective procedure in the project was documented. This means that processes, activities and methods as well as central decisions and communications have been documented. This knowledge is analyzed using the retrospective protocol. Findings that do not violate the company's compliance policy are presented in the full paper.

Results

The analyses carried out in the course of the research project initially show, that an application of the Scrum project management method originating from software development without any adaptations for the field of mechatronic system development leads to inefficiencies. Although these are multifaceted, in essence they are mostly due to supposedly missing structuring elements in the development process. However, the challenges, which, for example, occur because of communication, existing organisational structures or technical difficulties, are often very specific and require abstraction. An interesting finding is that the physicality of mechatronic systems does not immediately present a challenge for agile procedures. Rather, it is the expectations of the development teams as well as the handling of this physicality. However, the analysis and the transfer and comparison of the challenges in and with the principles for the agile development of mechatronic systems shows that the very free and little document-based principles from software development are not tenable in mechatronic system development. This is due in particular to the established structures and cultures. A structured and systematic presentation of the findings is presented in the full paper.

Contribution to Scholarship

The challenges identified in the article deepen and specify the broad findings from the state of the art in research, allowing their validity to be verified in a real case. In addition, the present article identifies effects that occur in reality, their causes and the concrete requirements for agile approaches to mechatronic system development. This allows not only the concrete description of the challenge but also the identification of the logic that exists between the respective cause and the resulting challenges. The principles derived from the challenges for the agile development of mechatronic systems serve as guidelines for the later development of practices and for process design in an agile context of mechatronic system development. The aim was not to derive principles for the most agile development possible, but rather to enable development with the right degree of agility.

Contribution to Practice

Through the analysis of practical applications and the subsequent abstraction of the challenges, a later deduction of the findings can be guaranteed respectively is already achieved through the derivation of best practices. The mechatronics systems development industry benefits from the knowledge gained from the basis created by this contribution. The assignment of real challenges to principles for the support of the agile mechatronic system development guarantees the later alignment of the approach for the development field under consideration. This prevents an approach developed for another industry being pushed into the mechatronic systems development industry, resulting in unavoidable inefficiencies.

Fitness

Agile approaches already have shown their strengths in R&D in software development. In order to be able to use these strengths increasingly in mechatronic system development in similar development phases, a fundamental understanding was created in the course of the research project on the basis of a real application case.

Bibliography

Eklund, U., Holmström Olsson, H., & Strøm, N. J. (2014). Industrial Challenges of Scaling Agile in Mass-Produced Embedded Systems. In T. Dingsøyr, N. B. Moe, R. Tonelli, S. Counsell, C. Gencel, & K. Petersen (Eds.), Lecture Notes in Business Information Processing: Vol. 199. Agile Methods. Large-Scale Development, Refactoring, Testing, and Estimation: XP 2014 International Workshops, Rome, Italy, May 26-30, 2014, Revised Selected Papers (Vol. 199, pp. 30–42). Cham, s.l.: Springer International Publishing.

Fowler, M., & Highsmith, J. (2001). The Agile Manifesto. Softw. Dev. 9, 28–35.

Heimicke, J., Niever, M., Zimmermann, V., Klippert, M., Marthaler, F., & Albers, A. (in press). Comparison of existing agile Approaches in the Context of Mechatronic System Development: Potentials and Limits in Implementation. International Conference on Engineering Design, ICED19.

Schmidt, T. S., Weiss, S., & Paetzold, K. (2017). Agile Development of Physical Products: An Empirical Study about Motivations, Potentials and Applicability. University of the German Federal Armed Forces.



 
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