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Blockbusters, Sequels and the Nature of Innovation
Using detailed product- and invention-level data from the pharmaceutical industry, we demonstrate that firms with particularly high-selling “blockbuster” products concentrate their development efforts on new products that both target the same customer segments and are more likely to be technically similar to existing blockbuster products. This behavior, driven by an expectation of the stickiness of demand for existing product offerings, limits firms‘ incentives to invest in entirely new products targeting different customer segments. Our findings offer insights into how blockbuster products shape firms‘ customer segment and innovation choices, with implications for understanding the dynamics of technological change in R&D-intensive industries.
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