Innovation risks of outsourcing in pharmaceutical new product development

New product development, which until relatively recently was a core activity within the pharmaceutical industry, is increasingly being outsourced (Howells et al., 2008). This is symptomatic of the transformation of product development towards a more decentralised, network-based and alliance-rich function. We have selected the pharmaceutical industry for this paper because it offers an excellent example of a research and technology intensive industry where outsourcing has led to problems in the innovation and new product development process. We examine the impact of the increase in outsourcing on the way firms manage the clinical trials process. The increasing role of Clinical Research Organisations (CROs) has dramatically changed the nature of the innovation process. CROs initially provided a limited service in clinical trials management, but have gradually evolved into organisations that have expertise across a much wider spectrum of the clinical development process. The fragmentation of the innovation process, which has arisen from the increased role of CROs, creates innovation risks for the pharmaceutical companies. In this paper we discuss the risks associated with knowledge losses for research and technology intensive industries that may arise from lack of integration of new product development activities and develop a number of propositions for further research.

► This paper addresses the innovation risks of outsourcing late-stage development in pharmaceuticals.
► Our focus is on the management of the outsourcing process itself and how this may create or destroy value.
► Innovation service providers have become key drivers of product development success.
► We identify potential knowledge losses at three levels within the clinical development process.