Innovation and firm size in the pharmaceutical industry

The paper explains the main features of the relationship between firm size and innovativeness in the pharmaceutical industry. As the biotechnological paradigm is progressively replacing the chemical one, the biotech start-ups are the principal engine of R&D activity. They discover new molecules and impulse drug innovation. Still, big pharmaceutical companies (big pharmas) have some advantages, such as benefiting from higher funds to support development of new drugs, scale and scope economies in R&D. Partnerships between small and big firms are developed on a win-win basis. Consequently, the size of the firm is a moving target. Innovation is to be linked with industrial, technological networks. Small firms are cooperating and so increasing returns to scale may appear at the level of the research networks, strategic alliances or bio-clusters. Industrial policies stimulating innovation as a competitive edge should then concentrate on creating strong incentives for small firms to cooperate.