Remaining innovative without sacrificing stability: an analysis of strategies in the Japanese pharmaceutical industry that enable firms to overcome inertia resulting from successful market penetration of new product development

Firms competing in increasingly technologically sophisticated markets have encountered a new set of challenges. Often as a firm becomes successful in technology development, inertia enters into the process. Successful co-evolution of technology often stimulates this inertia as a preference to just refine and market the same product, which ensures stability for the firm. Unfortunately, this tendency stifles innovation. We can observe this phenomenon by analyzing product changes in the pharmaceutical industry, which is a typical high intensive R&D industry. As an inevitable result of too much strengthening of a specific core field, one failure often observed is the inability to quickly move into complementary or different product areas. One survival solution is co-evolution of technology products developed in such a way that external and internal firm circumstances that affect the customer are constantly considered. The question this analysis addresses is, “How do we construct an interface between core and new products in order to simultaneously maximize core competence and yet at the same time remain flexible?” Institutional elasticity is one mechanism for creating such a trade-off between stability and ongoing new product development. Flexibility at the edge of product development could keep a firm from falling into a dangerous equilibrium position, thereby enabling it to remain innovative without sacrificing stability  2002 Elsevier Science Ltd. All rights reserved.