Uncertainty in innovation in the biotech-pharmaceutical industry

Abstract

Biotechnology, just like other dynamically growing branches of industry, has been very rapidly changing. Disruptive innovations arise from time to time. Since this is a very high risk - high benefit industry, and R & D phases often require several hundred millions of dollars, the participants seek to minimize and share risk. In case of biotechnology the assessment of risks (uncertainties) in the technological development is becoming an increasingly difficult task to solve. This is especially true in a rapidly changing turbulent environment, where environment and its knowledge changes from day to day, where in addition to small ones, radical innovations are typical as well. Understanding the necessary parameters is becoming more and more uncertain, thus also becoming limited. There is a huge literature on technological uncertainty just as there is on risks of financial issues. My main problem with this is that there is a strong inclination to believe that uncertainty can always be successfully modelled by quantitative risk assessment (qRA). In contrast to this, a wide range of environmental studies puts emphasis on the non-predictable risk. (Think of the the management consequence of non-predictability, the needed precaution.) A small biotech company has two alternatives for survival: finding a protected market, where, drawing on resources from outside, it can become influential, or by concentrating on cooperation, solving a partial task, working as part of a cluster, becoming an importer of knowledge.