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 res ources, 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 (comm ercial scale) R&D that utilizes the limited set of successful upstream rese arch outputs received from their collaborators. Small pharmaceutical firms that typically face both intense new product competition as well as high fa ilure risks in upstream research adopt this risk reduction strategy. The pr ocess model has been developed by drawing from and synthesizing in-depth pr oject case studies of small pharmaceutical firms. Apart from contributing t o the literature on managing technological collaboration, this model can en able practitioners in both firms and technology institutions to understandi ng effective processes for initiating and implementing this mutually benefi cial risk reduction strategy.