Strategic groups in the biopharmaceutical industry: Implications for performance

Abstract

The biopharmaceutical industry is characterized by intense competition, high uncertainty, and strong dependence on scientific knowledge. We show that in order to succeed in this industry, firms need to be positioned along three strategic dimensions: the level of inter-firm R&D partnering, the level of diversification, and the size of the firm. Prior research has revealed that a firm's membership in so-called ‘strategic groups’ impacts strongly on its performance. This study analyzes strategic groups in the biopharmaceutical industry along the strategic dimensions listed. The performance of the groups differs significantly. The best performing groups are the ones that consist of large firms with a high level of in-house diversification across therapeutic areas and the medium-sized firms that pursue partnership with other companies.