Research Policy, Volume 49, Issue 1, February 2020
Abstract: Emerging technologies are an important driver of economic growth. However, the process of their emergence may not only be characterized by technological progress but also by setbacks. We offer a perspective on technology emergence that explicitly incorporates setbacks into the technology’s evolution and explains how industry participants may react to setbacks in emerging technologies. We consider that the locus of innovation in an emerging technology encompasses different types of organizations (industry incumbents, entrants and public research organizations (PROs)) who operate in different institutional environments, and explore how these organizations react to setbacks in terms of their R&D efforts. We study two emerging biotechnologies in the global pharmaceutical industry – gene therapy (GT) and monoclonal antibodies (mAbs). The emergence of both technologies during the 1990s was punctuated by periods of setbacks. We observe a gradual increase in industry participants’ R&D efforts during periods of progress and a significant decline in those efforts immediately following setbacks. The decline in R&D efforts was more pronounced for firms than for PROs as well as for those firms that were listed on the stock market in contrast to those that were privately financed. Finally, the decline in R&D efforts towards GT was much more pronounced for those organizations located in countries with high capital fluidity. These findings reinforce that organizational and institutional characteristics that are typically attributed to facilitate R&D efforts towards emerging technologies do induce greater levels of those efforts during periods of progress. However, the same characteristics are also associated with a significant decline in R&D efforts immediately following periods of setbacks. Overall, the study illustrates how setbacks reconfigure the locus of innovation in emerging technologies and offers a richer perspective on technology emergence as one that is rooted in both progress and setbacks. In so doing, it highlights the challenges of sustaining technological progress and offers guidance for policy.