Embeddedness, social epistemology and breakthrough innovation: The case of the development of statins

Radical, breakthrough innovations create not only great industrial possibilities, but also great social uncertainties. When a breakthrough medical technology is discovered, the question arises as to whether to accept the possible risks involved, or to defer implementing the innovation until more data is available, and, specifically, until others have taken up the innovation and demonstrated both its efficacy, its relative safety and market acceptance. Specifically, when a firm discovers a new candidate substance for a first in its class drug, how to evaluate the potential risks becomes a key predicament for management. This paper focuses on the role of a firm's social networks and national innovation system context in influencing the social epistemology around potential breakthrough innovations. Through an examination of the processes of drug development related to the same candidate substance in a Japanese firm and an American firm, we suggest that, in addition to organizational capabilities at the corporate level, social capital, specifically formed under a certain innovation system, plays a key role in leading to the successful introduction of breakthrough innovations.